A 'Quantum Leap' in Governance of the Euro Zone Is Needed

[FarCenter]

European Central Bank President Jean-Claude Trichet: "We are facing the most difficult situation since the Second World War -- perhaps even since the First World War.'

In a SPIEGEL interview, Jean-Claude Trichet, the 67-year-old president of the European Central Bank, discusses the largest financial rescue package in the history of Europe, the role and importance of speculators in the euro crisis and the weakness shown by politicians in the euro zone member states.

SPIEGEL: Mr. Trichet, how have you been sleeping these last few days?

Trichet: I always sleep well!

SPIEGEL: You haven't had any nightmares?

Trichet: No.

SPIEGEL: Nevertheless, the financial world has changed since the weekend before last. The countries of the euro area have put together a previously unimaginable rescue package with a value of over €700 billion ($889 billion) in order to save reeling member states from default. Even your institution has relented on a few of its firmest principles and now intends to purchase even poorly rated government bonds.

Trichet: No, we have not relented on our principles. Price stability is our primary mandate and compass. That being said, it is clear that since September 2008 we have been facing the most difficult situation since the Second World War -- perhaps even since the First World War. We have experienced -- and are experiencing -- truly dramatic times.

SPIEGEL: That's been evident from the way that you and others have been behaving over the last few days.

Trichet: At times like these, you have to keep your composure and analyze the situation as lucidly as possible. Back in August 2007, we were the first major institution in the world to correctly judge what was happening on the capital markets with the start of the turbulence. And we reacted swiftly.

SPIEGEL: What exactly happened between Thursday and Sunday of the week before last, when Europe's heads of state and government launched the largest financial rescue package in the history of Europe?

Trichet: On Thursday afternoon and throughout Friday, we had a continuous deterioration of the situation in the financial markets, both in Europe and, as a consequence, at the global level. On Friday, markets closed and number of important indicators -- spreads on sovereign bonds in Europe, CDS spreads and the situation in the interbank market -- were signalling the spreading of severe tensions. I made those points to the heads of state and government on Friday evening. That is what happened between Thursday morning and Friday evening. Being permanently alert is of the essence when you have important responsibilities.

SPIEGEL: Hedge funds and other speculative investors currently manage assets with a total value of $2.6 trillion. But even an unimaginable sum like that should not really be enough to bet against the euro area. So, do you think that we're vulnerable?

Trichet: Not if we do our job, properly.

SPIEGEL: The speculators just exacerbate existing problems?

Trichet: One has to put one's own house in order first. These big and highly leveraged institutions are a major issue to be addressed at the global level.

<SNIP>http://www.spiegel.de/international/europe/0,1518,694960,00.html

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The key villans are the hedge funds and private equity funds. The banks are just their errand boys.

Hedge funds and private equity funds must be brought under regulation.

[Go2Peace]

1. Say the villans who brought the who thing into being

The same culprits are controlling the situation in Europe that have taken down world economies for many years with their Greed based values. The world bank and the consortiom of world bankers. And the worldwide Republican movement, that comes in many flavors.