Bank of Greece marks its 75th anniversary

The Bank of Greece yesterday celebrated its 75th anniversary with an event held at the Athens Concert Hall and attended by the country’s entire political leadership and many bankers and businesspeople. Among the featured speakers were the top leaders of the European Central Bank: President Jean-Claude Trichet, in his first public appearance in this capacity since taking over from Wim Duisenberg on Saturday, and Deputy President Lucas Papademos, a former Bank of Greece governor from 1994 to 2002. Trichet centered his brief speech around the theme of inspiring confidence in the euro, the common currency of 12 countries. He avoided, however, any direct reference to the present troubles within the eurozone, with its two biggest economies, Germany and France, posting excessive deficits and calling into question the Stability and Growth Pact agreed to in 1997 as a precondition of the euro’s acceptance. «What we have to deliver is a credible currency that will inspire the confidence of euro-area citizens and all economic agents,» Trichet said, adding that confidence in the euro «is a major contribution to growth and job creation.» Trichet also pledged to continue along the path followed by Duisenberg, the founding ECB president, who was appointed in 1998 in a compromise between the Germans and the French. The latter had pushed for Trichet’s appointment back then and finally agreed that Duisenberg would retire in 2002 to make way for Trichet. However, a judicial affair over the mismanagement of French bank Credit Lyonnais, in which Trichet himself, as Bank of France governor, was implicated, delayed the transition. Trichet was acquitted of all charges this spring. Later yesterday, Trichet flew to Brussels where he plunged straight into a crisis over the European Commission’s expressed wish to impose some penalty on France and Germany for their excessive budget deficit and the two countries’ resistance to any disciplinary procedure. Papademos was more forthright in defending the Stability and Growth Pact: «In the present circumstances, with budget deficits in some eurozone countries exceeding the 3 percent limit, there is an urgent need for drastic corrective measures to be taken… so that the credibility of the Stability Pact is not undermined,» Papademos said. Papademos also referred to Greece’s persistently high inflation, relative to the eurozone average. He blamed it on expansionary fiscal policy, preparations for the 2004 Athens Olympics and some «excessive» developments in the banking and property sectors, namely the explosive growth in loans and the steep rise in property prices. As he had often done in his former capacity as Greece’s central banker, Papademos recommended market deregulation and structural reforms to render the labor and commodity markets more flexible. Prime Minister Costas Simitis chose to focus on the achievements of his government, reminding the audience that it drastically reduced budget deficits and inflation without hurting economic growth. He said that the Bank of Greece, for years merely a government tool, was now responsible, as part of the ECB, for the country’s monetary policy. «Its most important task is to oversee banking institutions and ensure the stability of Greece’s financial system,» Simitis said. He added that the government, having established an independent authority to monitor capital markets, will set up another one to oversee insurance companies.