European Central Bank President Jean- Claude Trichet may today play the interest-rate card and signal to European governments that the euro region’s debt crisis is theirs to solve.
Two days after German Finance Minister Wolfgang Schaeuble opened a rift with the ECB over how to fix Greece’s debt crisis, Trichet is likely to signal that the ECB is ready to raise interest rates for a second time in three months in July, a Bloomberg News survey showed. The central bank today will keep its benchmark at 1.25 percent, a separate survey showed.
The latest phase of the Greek crisis risks exacerbating tensions between the ECB and the German government. While Schaeuble said in a letter published June 7 that bondholders should be stung as part of a second Greek bailout package, the ECB argues that such a step could spark a new wave of financial turmoil and insists it’s ready to press on with raising rates.
“If there’s a hardening of attitudes between Germany and the ECB, the ECB are just going to dig in their heels and insist on their independence,” said James Nixon, chief European economist at Societe Generale SA in London. “They’re going to tell European governments it’s their problem and they can clear up the mess.”
Bloomberg
