PARIS. As a convinced pro-European, Jean-Claude Trichet, 79, lives this election weekend with some unease. As president of the ECB, from 2003 to 2011, he saw all sorts of things, especially after the bankruptcy of Lehman Brothers.
How do you judge Marine Le Pen’s economic program?
«It would significantly weaken the competitiveness of France, it would deteriorate the public finances of a country which, on the other hand, must restore them and would increase unemployment. Then you defend values that are the opposite of those of the successive governments of our country, left and right, since the beginning of the Fifth Republic ».
But the far-right candidate no longer wants to leave the EU or the euro …
«The ambiguity of his positions regarding Europe is very great. He understood that the mediocre result of 5 years ago depended to a large extent on the goal of leaving the Union and the euro. But even today the reflexes of his party and of the voters remain viscerally anti-European. In the televised debate with Emmanuel Macron, Le Pen was keen to make the difference between Europe and the European Union. It is not only anti-German, it is anti-EU ».
Would a possible election of Le Pen lead to distrust of the markets in France?
“This eventuality is very unlikely and the markets are not anticipating it at all. Then it is clear that his program could only worsen the French state’s ability to finance itself ».
Will inflation last in the Eurozone and the US?
“After ten years, during which the main threat for everyone was the materialization of deflationary risk, central banks now have to face that of lasting inflation. That said, the latest figures give a core inflation of 3.2% in the euro area and 6.5% in the US. We are less affected by the problem, but we must remain very vigilant ».
Was the Fed right to raise rates? Should he have done this before?
“The initial diagnosis in the US was wrong. After believing that inflation was transitory, the Federal Bank had to recognize that it would last a long time and that it was necessary to intervene vigorously on rates. The US must regain control of inflation expectations over the medium term and this will be very difficult. In Europe it is important that the ECB maintains the anchoring of expectations on 2% ».
Will the ECB also be forced to raise rates?
“Of course, in the future he will have to do it. With core inflation of 3.2%, or 1.2% above the price stability target, the interest rate on deposits at minus 0.5% is obviously not aligned. The ECB did well to confirm the interruption of the purchases of the Pepp (Pandemic emergency purchase program). It has become more credible ».
The war in Ukraine has negative effects on inflation …
“The conflict has both inflationary and recessive effects simultaneously. In this context, it is even more important to strengthen the credibility of the central bank and the anchoring of inflation expectations ».
How do you judge the value of the shares in Europe and the US? Need corrections?
‘Usual indicators, such as Cape Shiller and Tobin Q, show that the values are far above historical averages. It is the same for all assets, including real estate. There will necessarily be corrections in the medium term ».
Do you agree with the “whatever it takes” adopted by France (loosening the constraints on the public deficit), but also by the other European countries and the USA?
“Public spending in response to the frightening impact of the pandemic was justified. The very important increase in public debt between the two crises, of Lehman Brothers and Covid, was not. The world one has risen from 70% of the global GDP in 2007 to 124% in 2020 ».
How do you rate Mario Draghi’s action in Italy?
“Draghi, my successor at the ECB and friend, has carried out a formidable job. It would be catastrophic for Italy if there was a government crisis. He is the premier of the reforms that Italy needs. He inspires confidence in Italians, Europeans and the rest of the world ».