Pope, ECB chief slam governments over debt crisis
Europe's central bank chief and Pope Benedict XVI Saturday hit out at spendthrift governments and "irresponsible" speculators as investors battered the euro over fears of unsustainable debts.
With the euro having hit a four-year low against the dollar this week, ECB chief Jean-Claude Trichet insisted it isn't the currency that has a credibility problem, but the finances of certain eurozone countries.
"It's not the euro which is under threat but the fiscal policies of certain countries which must be taken in hand," he said in an interview published in the Frankfurter Allgemeine Zeitung daily.
Financial markets have been racked for days by worries over the possibility that some eurozone economies will no longer be in a position to repay debts and even that the eurozone itself could come apart because of the crisis.
Despite agreeing on a 750-billion-euro rescue package for any eurozone country that runs into financial straits, investors continued to flee the euro with the currency on Wednesday hitting 1.2144 dollars -- the lowest level since mid-April 2006.
The euro, which has shed nearly 16 percent of its value since starting the year at 1.4386 dollars, recovered slightly to end the week at 1.2563 dollars.
This decline helped prompt European finance ministers on Friday to agree to harden budget rules in another bid to reassure investors that the currency union wouldn't burst apart.
"We need a change of values in the financial sector," Trichet said.
"In the financial sector in general, not just in the banks, certain behaviour has developed which is greatly at odds with the basic values of our democratic societies," he said.
"Market movements are always a combination of investors' moods and the influence of speculators like the hedge funds," Trichet said, renewing a call for greater regulation of banks and speculative funds.
European finance ministers on Tuesday agreed on the need for "strict" new curbs on the trillion-dollar hedge fund industry, despite stiff resistance from Britain.
Trichet's comments were echoed by Pope Benedict XVI, who criticised governments for failing to take tough action to regulate banks and markets in the wake of the financial crisis.
Some heads of state "do not react with the appropriate decisions on the governance of finance when faced with renewed episodes of irresponsible speculation directed towards weaker countries," the pope said.
"Politics needs to have primacy over finance, and morality needs to guide every activity," Benedict told a conference at the Vatican.
Europe has come under heavy criticism for its handling of the debt crisis, with many analysts pointing to indecision and discord in Europe's biggest economies and at the very heart of European policymaking.
The head of the Organization of Economic Cooperation and Development sought to reassure markets on the euro.
"The euro is a great edifice, it will endure, and even more countries will adopt the single currency," Angel Gurria said at the online edition of the magazine Der Spiegel.
"The price declines are based on short-term turbulence. They do not justify doubts about the existence of the currency," he added.
In Germany meanwhile, the head of Germany's top bank, Deutsche Bank, came in for more sharp criticism from Finance Minister Wolfgang Schaeuble.
"A man like the head of Deutsche Bank, Josef Ackermann... finds a rate of return of 25 percent appropriate. No manufacturing company could achieve that," Schaeuble told the Frankfurter Allgemeine Zeitung.
"We must conclude that the financial market serves only its own interests instead of fulfilling its mission" to finance the economy, he charged.
Berlin recently criticised Ackermann for publicly expressing doubts that Greece would be able to repay its debts, fouling the effort by the EU and the IMF to calm markets with a 110-billion-euro bailout for Athens.
Elsewhere in Europe, the Bank of Spain said Saturday it was taking over the running of a regional savings bank controlled by the Roman Catholic Church after it experienced financial difficulties and a merger plan failed.
Cajasur, a small southern bank that accounts for less than one percent of the assets of the Spanish banking system, chalked up losses of 596 million euros en 2009 and 114 million in the first quarter of 2010.
While Spain's major banks have weathered the financial crisis fairly well, its smaller ones, many controlled by regional governments, have been hit hard by the bust of the country's property market.
The bishop of Cordoba, Demetrio Fernandez, said Cajasur "is not bankrupt nor does it have black holes, it is weak but healthy," in an interview published on the Catholic website Infocatolica.
© 2010 AFP