Trichet vs. Sarkozy

Since Nicholas Sarkozy became the president of France, he has relentlessly attacked the ECB for allegedly pursuing too tight monetary policies. Which is of course complete nonsense considering how money supply growth have risen above 10% in the euro area, so what the ECB should be criticized for is the exact opposite-namely of pursuing too inflationary policies. Their cancellation of the signaled September 6 interest rate increase completely eroded their already weak credibility as inflation hawks or as independent of politics. That was in effect an appeasement of the monetary crank Sarkozy. And after the ECB announced the cancellation of the rate hike, Sarkozy of course publicly gloated and took credit for it. While the August credit scare probably had a bigger role, Sarkozy is certainly right that it was a PR victory for him and that the ECB dishonored itself.

Now ECB chief Jean-Claude Trichet tries to shift the attention away from him by attacking Sarkozy for spending too much and running a too large budget deficit. He is certainly right about that as France now has the by far highest government spending to GDP in Europe -and the entire world, except for maybe North Korea and Cuba- and the highest budget deficit of Western Europe. That is of course the real reason for France's weak growth, not the non-existent tightness of ECB policy. But while Sarkozy is an economic crank, at least he is a crank with honor. Trichet by contrast is dishonored and humiliated by his cowardice appeasement of Sarkozy.