But, rightly or wrongly, the impression from afar is that Euroland is some way from possessing these necessary elements of structural flexibility. Consequently, there is concern whether intra-Euroland adjustment between disparate regions, when the exchange rate is no longer an  3  BIS Review 23/2000  instrument and fiscal policy is supposedly constrained by Treaty criteria, will prove to be too painful for some. There are other structural features of Euroland, which also cause some concern to observers from my side of the world. These include high taxation, stringent regulation and cosy corporate governance characterised by the equity of major businesses being closely held by friendly groups of long-term investors, including one’s bankers and associate companies - or Euroland’s version of the crony capitalism for which parts of Asia have been so severely rebuked. From bitter experience, I know as well as you do that the media tend to exaggerate the negative and overlook the positive. The vision of Euroland which may consequently predominate in the sub-conscious of Asian readers might include such things as French truckdrivers blockading autoroutes; German resistance to foreign takeovers; relatively high taxes and a heavy burden of social security contributions; and statutory ceilings on the number of hours employees may work. But let me refrain from venturing too far and turn to the financial system of Euroland. The perception is that it is dominated by the banking sector, which is in turn dominated by a handful of huge traditional commercial banks.
It left the punch bowl on the table and said “let’s party” ... Trichet: As regards the punch bowl, you are quoting William McChesney Martin, a previous Chairman of the Federal Reserve! Again, let me say that we are united in purpose. As regards the ECB, the very solid anchoring of inflation expectations is a major asset in all circumstances. FOCUS: However, you do sometimes make comments about the US Federal Reserve. When its Chairman, Ben Bernanke, was chosen as Time magazine’s Person of the Year, you commended him, saying that he had done extraordinary things under extraordinary circumstances. Were they also the right things? Trichet: When the financial crisis intensified in 2008, the ECB and the Federal Reserve cooperated closely, together with other central banks, including through swap agreements. We ourselves supplied US dollars on this side of the Atlantic as part of this very close cooperation. 2  BIS Review 7/2010  FOCUS: How important is it, in such dramatic situations, that the ECB is able to act independently of politics? Trichet: This is crucial. The European Central Bank is totally independent. This is guaranteed for us by an international treaty. It is essential for the confidence of our fellow citizens, economic agents and market participants. And “confidence” is the key word at the moment. FOCUS: Do you consider this independence to be a great advantage? The Chairman of the Federal Reserve was appointed by the President – and the Senate is currently deciding whether Ben Bernanke can have a second term in office.