The Wall Street Journal has given a lengthy account of how the European Central Bank came of age during the summer’s liquidity crisis. It says that on August 9th, the bank finally ‘grew up’ after what it portrays as a nine-year infancy, due to the management style of Wim Duisenburg, the ECB’s former president.
Trichet takes the role of a hero, whose ‘trenchant’ decision to lend €95bn to lubricate the banking system saved the day and gained the bank some much needed credibility. The ‘war games’ – where ECB policymakers ran through hypothetical banking crises – comes in for special attention, since one such game closely mirrored the crisis that would subsequently unfold over the summer.
The ECB is not uniformly praised however. The Journal is critical of the ECB’s seemingly contradictory statements on monetary policy in the immediate aftermath of the liquidity injections. Here it sees the persisitence of an old problem that has still not been ironed out: the ECB’s inability to clearly communicate its intention on interest rates.