Business World

Tuesday 12 December 2017

ECB insiders feather nests as euro hangs by a thread

Trichet to join Exocet missile-maker

Outgoing ECB president Jean Claude Trichet hinted that relief may be on the way for homeowners over the medium term as Europe's economy cools and inflation rates fall. Photo: Getty Images
Outgoing ECB president Jean Claude Trichet hinted that relief may be on the way for homeowners over the medium term as Europe's economy cools and inflation rates fall. Photo: Getty Images
Nick Webb

Nick Webb

JEAN Claude Trichet, the former head of the European Central Bank (ECB) whose tenure included the Irish banking crisis and the European debt shambles, bagged a share of the €640,000 in special payments made to executive board members of the Frankfurt-headquartered bank last year -- on top of his €309,000 wage packet.

While the entire future of the euro hangs by a thread as the "Grexit" or Greek exit from Europe's shared currency looms large, the ECB remains a cosy place to work for insiders.

The 2011 annual report of the bank, issued last week, shows that the executive board members earned a combined €1.749m last year -- up from €1.734m in 2010.

While Trichet described his helming of the European Central Bank as "impeccable", the 20 per cent unemployment rate in Spain, tumbling value of the euro and widespread recession across the region may call this into question.

The savage austerity measures unleashed in response to the crisis may seem far away from the rarified confines of top floors of the new €500m European Central Bank headquarters shaping the skyline of Frankfurt.

The top ranks of the ECB are extremely well paid and have their nests feathered when they leave. Transitional payments made to departing technocrats, combined with their special family allowances and ECB contribution to their medical and accident insurance schemes rose from €34,868 to €479,665 in the year of Trichet's exit.

Benefits on appointment or termination of service to the board rose from €52,548 in 2010 to €159,594 in 2011 when Trichet retired.

The huge payments to former executive board members such as Trichet are extremely galling given that his reign at the ECB was marked by a complete failure to adequately warn or prepare for the eurozone debt crisis.

The ECB's initially low-key reaction to the debt crisis has been criticised widely, with Nobel prize-winning economist Paul Krugman particularly damning.

The ECB was finally moved to bolster the banking sector last December by launching a major long-term refinancing operation, which pumped billions of cheap money into the wobbling sector.

Trichet was a pivotal player in the decision to extend the blanket guarantee to the Irish banks and pay back the bondholders of the bailed out banks.

The move to pay back bondholders, which helped maintain some level of investor confidence in Europe, utterly kyboshed the Irish economy.

The Frenchman was also steadfast in his opposition to a deal being done on the refinancing of the Anglo Irish Bank promissory notes.

Following his retirement last October, Trichet has joined the non-executive director gravy train. In January, it was announced that he would join the board of Franco-German defence and aviation firm EADS. The €24bn valued firm is one of the manufacturers of the eurofighter Typhoon and Dassault mirage jet fighters as well as Exocet and rapier missiles.

Last year the 10 EADS non-executive board members were paid around €1.6m.

EADS shareholders will vote on Trichet's election to the board in two weeks time, at its annual general meeting.

Sunday Indo Business

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