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Last Updated: Monday, 6 January, 2003, 11:51 GMT
Jean-Claude Trichet: Banker in a bind
By James Arnold
BBC News Online business reporter

It's not often that you can call a central banker glamorous, and keep a straight face.

The job's virtues - exemplified by European Central Bank (ECB) chief Wim Duisenberg, or Alan Greenspan, his US counterpart - tend to be stolidity, calmness, attention to detail and an ability to give nothing away in interviews.

Jean-Claude Trichet
Can Mr Trichet talk his way out of this crisis?
But Jean-Claude Trichet, head of the Banque de France and the man most likely to step into Mr Duisenberg's shoes, does have a certain chic allure.

Crucially, he also commands the almost universal respect of the financial community.

Now, however, the poetry-loving product of an academic family will need all his charm to escape censure over his involvement in one of the largest banking scandals in French history.

Star eclipsed

Mr Trichet is the man who many believed should have won the ECB job when it was created in 1998.

Seen as one of the world's most brilliant central bankers, he enjoys a respect in the financial markets that the more awkward Mr Duisenberg could only envy.

JEAN-CLAUDE TRICHET
Born 1942 in Lyons
Graduate in engineering and economics, Institut d'Etudes Politiques, Paris
1971-1978: Held various posts in finance ministry
1978-1981: Held various government advisory posts
1984-1993: Held various posts at the Treasury, rising to become head by 1987
1987: Joined general council of the Banque de France, became deputy governor of the IMF and World Bank
1993: Became governor of the Banque de France
2000: Put under investigation over Credit Lyonnais accounts
2002: Ordered to stand trial
His failure to clinch the job first time around was the result of a political stitch-up, when Germany got cold feet over the idea of having a Frenchman at Europe's economic helm, and insisted on the neutrally Dutch Mr Duisenberg.

At the time, there was an agreement that Mr Duisenberg would step down halfway through his term, to make way for Mr Trichet, and keep the Franco-German EU axis trouble-free.

After some foot-dragging, Mr Duisenberg eventually agreed to step aside almost a year ago, and is due to clear his desk this summer.

Called to account

But Mr Trichet's effortless apotheosis is running into trouble.

This week, he is one of nine defendants on trial over irregularities at Credit Lyonnais, one of France's biggest banks.

During the 1980s, the then state-owned Credit Lyonnais lent money exuberantly, plunged into the red when many loans turned bad, and then cooked the books to disguise its losses.

Wim Duisenberg
Mr Duisenberg won the battle first time around
Credit Lyonnais' lending record, and the process by which it has been restructured, is now under investigation, and Mr Trichet, a top Treasury official at the time, is accused of complicity in producing those misleading accounts.

Cleaning up the bank, which involved transferring much of the bad debt into another entity, is estimated to be costing the French taxpayer as much as 30bn euros (19bn; $31bn).

Assessing the chances of a conviction - or indeed any kind of conclusive outcome from this trial - is impossible.

Most pundits suggest that the French Government will contrive some way of freeing up Mr Trichet, who remains their preferred candidate.

An official pardon, if necessary, is seen as the most likely outcome.

Certainly, Mr Trichet and his supporters have not exactly been quaking in their boots over the past six months or so.

Money man

And whatever the rights and wrongs of the Credit Lyonnais affair, from a purely economic point of view it would be a shame if Mr Trichet were torpedoed.

Contrary to the German image of the French as slippery spendthrifts, he has admirably puritan views on monetary policy, and has lobbied hard for the government to cut its swelling budget deficit.

The ECB headquarters in Frankfurt
Mr Trichet needs to shake things up in Frankfurt
More importantly still, he is seen as one of the few men capable of leading much-needed reform at the ECB, whose rules and practices are reckoned in need of adjustment, especially in view of the three-year decline of the euro.

The French have made no secret of their plans for ECB reform: the government commissioned two in-depth reports last year which argued in favour of adopting the Bank of England as a model.

This means slimmer administration, more transparent workings and a more realistic inflation target, as well as possible changes to the strict policy of targeting inflation, rather than aiding growth.

These are precisely the sort of reforms that could go some way to revive the eurozone's sluggish economy, and may even make the ECB more palatable to sceptics such as UK Chancellor Gordon Brown.

Even Mr Trichet, however, may not be able to make it glamorous.


SEE ALSO:
French bank chief stands trial
06 Jan 03  |  Business
Tricky issues at EU finance meeting
05 Mar 02  |  Business
Succession scramble at ECB
13 Feb 02  |  Business
Wim Duisenberg's legacy
07 Feb 02  |  Business
Duisenberg to quit ECB
07 Feb 02  |  Business


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