Strong controls urged for unified GCC currency
Kuwait, April 11, 2012
Strong governance and a solid framework for budget and fiscal policies will be required for a future GCC unified currency, said former European Central Bank president Jean Claude Trichet.
Trichet was speaking at an annual international symposium organised by National Bank of Kuwait (NBK) recently.
The former central banker, who is also a former Governor of Banque de France and served two terms as ECB president, also offered lessons on the euro zone sovereign debt crisis and the global economy since 2007.
In his presentation, Trichet explained how the US had been the epicenter for the first two episodes of the global financial crisis but that this shifted to Europe and the eurozone in particular with the start of the sovereign debt difficulties in Greece and elsewhere.
Ibrahim S Dabdoub, NBK Group CEO noted that, “In the last year or so, the central focus of the world of banking and finance has been on Europe and the euro zone. What happens to the world’s second largest economy and its unified currency has momentous importance, both for the short and long term.”
“This is why NBK invited Trichet to speak. With more than 30 years of European financial and policy leadership, Trichet is an authority on the euro zone and the global economic system. We thank him for coming to speak with us and shedding light on these very critical issues,” Dabdoub added.
Trichet also noted that advanced economies in the world are experiencing what he labeled a ‘structural adaptation’ to the new global economy.
He explained that the global economic crisis which begun in 2007 has undergone major three episodes: the financial turbulence of late 2007 to 2008; the intensification of the crisis multiplied by the collapse of Lehman Brothers and the rapidity of the transmission of financial shocks and most recently, the eurozone’s sovereign risk problems.
“In a handful of days the whole world changed,” Trichet said, commenting on the rapidity of the spread of financial shock felt around the globe following the collapse of the Lehman Brothers bank in the US and the intensification of the credit crunch.
The former ECB head warned that the key to the eurozone’s future would be a matter of governance. “The eurozone is not particularly vulnerable. The euro retains a remarkable level of confidence and credibility…The euro is solid because it keeps its value.”
But ‘benign neglect’ of individual governments to adhere to and enforce strict fiscal policies and to imbalances in the competitiveness of various eurozone countries fueled the current sovereign risk crisis. – TradeArabia News Service