Recently the media has been concentrating on the race to replace Mr. Jean Claude Trichet at the helm of the European Central Bank, when his mandate terminates in October. However, what he will do next may be equally important.
Mr. Trichet had a distinguished career in banking before taking over at the ECB, and that contributed to the success of his tenure at the helm of the ECB. He is certainly looking forward to a well deserved retirement.
Yet, given his unique statesmanship, Europe would be well advised to ask him for a last service to Europe – to restructure the sovereign debt in the periphery countries. He was a driving force in the ECB policy of rescuing the banks in the periphery of the Euro Zone and his past position at the helm of the Paris Club makes him specially qualified to lead the process of debt restructuring in the periphery countries of the Euro Area.
Yes I know, one must deny the need for foreign debt restructuring until the last minute. However, with 2-year rates in Greece at 23%, one can hardly pretend that things can go on for long. Moreover, the recent experience of dealing with bailouts on a case by case basis was not exactly a success.
So the appointment of a restructuring czar within the European Financial Stability Facility must be considered now. This is preferable to letting things deteriorate until they have to recur to the traditional Paris Club mechanisms.
Such czar needs a credibility that only a few like Mr. Trichet have.