Bugger the Bundesbank — that seems to be ECB President Jean-Claude Trichet’s
current raison d’être. The ECB, together with other global central banks, yesterday agreed to provide dollar funding to ease the mounting liquidity crisis in European banks, largely caused by American
banks curtailing
interbank lending in anticipation of another crisis. This unorthodox action runs contrary to the wishes of the German Bundesbank, adding to the pre-existing strain between the ECB and the
German establishment over bond purchasing, tension that was epitomised by the resignation of Jurgen Stark last weekend.
Obviously, central banks do not take this action every day and it is yet another indication that crisis is now impending. European finance ministers are meeting today and it remains to be seen if they can offer anything other than the words that have become Angela Merkel’s staple.
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