OMFIF analysis of departing ECB president's speeches
Trichet’s vocabulary displays adaptability to changing financial moods
by David Marsh and Fredrik Kinell, OMFIF, London
Mon 31 Oct 2011
Jean-Claude Trichet, who steps down on 31 October after eight adventurous years atop the European Central Bank, has shown himself a supremely flexible master of monetary phraseology, ably adapting his statements to shifting financial market moods.
A central banker who in the first four years of his mandate praised the role of the ECB in generating jobs and extolled European financial integration as a force for stability has virtually dropped those terms from his vocabulary.
Instead, in the harsher times since the financial crisis erupted in August 2007, Trichet now places much greater emphasis on previously underplayed buzzwords such as “governance”, “imbalance” and “risk”.
A textual analysis of Trichet’s formidable array of public speeches (278 over eight years) reveals a pronounced emphasis of themes in line with prevailing financial sentiment.
A charge of verbal opportunism - Trichet would probably prefer the description “dexterity” - is not the most welcome accolade for a man hugely attentive to his legacy. The retiring ECB president departs with his head held high after the latest Brussels summit deal to resolve the debt crisis around Europe’s single currency.
Trichet would like to go down in history as an unbending adversary of inflation and a constant upholder of central banking independence, caring little for fluctuating political or economic whims. The truth is somewhat less heroic. Like a football manager looking back at a turbulent match, Trichet can reflect that his eight year mandate has been a game of two halves.
In the four relatively tranquil years between his start in November 2003 and the turbulence of August 2007, two significant issues characterised Trichet’s public pronouncements. One was the benevolent effect of monetary union in supporting job creation throughout the euro area. Correspondingly, the words “employment”, “unemployment” or “jobs” cropped up on average four times per speech between 2003 and 2007. In the four years since, Trichet has used the words only once in every speech.
The second well-publicised area was “financial integration”. This reflected the prevailing mood that extension of cross-border bank lending throughout the euro area and especially the new interweaving networks of creditors and debtors across bond markets would be a stabilising force – a strategy that the European sovereign debt crisis has revealed as a painful illusion. Trichet deployed the words “financial integration” five times per speech in 2003-07, but usage has since dropped precipitously to less than once per speech.
What words have taken up the slack? As part of efforts to enforce greater economic cohesion among monetary union members, Trichet since 2008 has paid correspondingly greater attention to “governance”, “imbalances” (both used twice in each speech) and “risk” (10 times per speech) - twice pre-crisis usage.
Not surprisingly, the word “crisis” has become a firm part of Trichet’s vocabulary since 2007, employed 10 times in every address during the past three years after hardly being mentioned in the years before 2007. Trichet has shown continuity with his predecessor Wim Duisenberg, who also emphasised employment issues during his term of office in 1998-2003 and spoke of “governance”, “imbalances” and “risk” only sparingly.
In line with traditional central banking practice, Duisenberg mentioned “inflation” four times per speech on average in his five years in the job. Trichet increased “inflation” usage to eight times per speech in 2003-07 before lowering this to only four times per outing in the last four years as the challenge of price rises became less pressing in the light of the economic downturn. In one area, Trichet showed himself a clear winner: the Frenchman gave roughly 40% more speeches per year than his Dutch predecessor.
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