A “wave of confidence” is behind recent investments in the euro zone and the strength of the single currency, according to the former President of the European Central Bank, Jean-Claude Trichet.
The rebound in peripheral euro zone bonds, despite a so far weak economic recovery described, has been attributed to various factors, including the lack of return on other investments. However, Trichet, who ran the central bank between 2003 and 2011, argued the answer was confidence.
“Global investors were extremely negative on the integrity of the euro, and now that its resilience has been proved there is a wave of confidence which might explain this strange behaviour,” he claimed in an interview with CNBC.
Mario Draghi, Trichet’s successor at the ECB, last week introduced a range of unconventional monetary policy measures — including negative interest rates on bank deposits and a new system of ultra-cheap loans to back small business — to try and tackle the lack of dynamism in the real economy. While there are no longer concerns about the survival of the euro, which sent bond yields in countries like Greece soaring to record highs during the debt crisis, employment and economic growth have stagnated in the region.
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