Former ECD President on coronavirus impact in EU

Jean-Claude Trichet, Former ECB President, joins Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Emily McCormick to discuss how the global markets are faring amid the coronavirus outbreak.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to welcome now Jean-Claude Trichet. He is the former president of the European Central Bank. He is joining us this morning. And it's good to see you, Mr. Trichet.

I know that you were at the ECB during the Greek economic crisis. And I would love your thoughts on what's happening during this pandemic regarding Europe. First off, Austria is the first European nation to roll out plans to at least begin to restart their economy. There are reports that Austria wants to open some non-essential shops beginning April 13 or 14. To your mind, do you think they're acting a little too quickly Here

JEAN-CLAUDE TRICHET: Let me-- let me only say that it's clear that also in Europe, as was mentioned for the US, we see a number of indicators that are signaling that the peak of the fatalities, as well as the peak of the number of people infected, is now attained and that it does not augment anymore. It doesn't mean that we-- we are not in a situation where a number of countries have still a very, very important level of infected people [? or ?] and of fatalities, but it seems that it does not augment anymore in Spain, in Italy, in France.

So we have to remain very cautious and prudent, but it looks like the measures that we are taking, the social distance, the confinement, are operating. Again, we have to remain very prudent and cautious, but these are signs that are equivalent to what has been observed also in the US.

ALEXIS CHRISTOFOROUS: Mr. Trichet, some say that the virus has really highlighted the ongoing divide in the-- in the eurozone, the divide between the more financially secure countries in the northern part versus the-- the more fragile southern countries like Italy, Spain, Portugal. We know the EU survived the debt crisis, but do you think that this pandemic actually threatens the EU as we know it?

JEAN-CLAUDE TRICHET: No, I don't think so for several reasons. First of all, we proved-- we had the stress test, if I may, because, at the time, it was not a pandemic, but it was a sovereign risk crisis, which was hitting Europe very, very I would say aggressively. And we went through this very difficult period. As I said, we had our stress test.

Second, I expect that part of the additional public spendings and fiscal appropriations associated with the overall pandemic will be taken on a collegial, collective, solidarity basis. We will see what happens. This is one of the very important points, which will be discussed this week between the executive branches, the ministers of finance, and on the basis of the presentation of the minister of finance with [? heads. ?] And I expect that part of the additional fiscal burden will be shared more largely by the European as a whole.

BRIAN SOZZI: Mr. Trichet, do you think-- JPMorgan CEO, Jamie Dimon, warned this morning of stress in the financial system. Do you think equity and bond investors have priced correctly rising stress in those markets?

JEAN-CLAUDE TRICHET: Well, as you know, former central banker, as well as a present central banker, never engage in making I would say a projection, as regards markets of course. But I would-- when I look at what happened in the US, as well as in Europe, I see, of course, a correction, which is very ample.

Of course, you would tell me there was a correction in the cards, even before the pandemic. We had some kind of maybe asset inflation or inflation in a number of asset classes. But, all taken into account, I think that the amplification and the expectation, anticipation of the real economy crisis has been done quite substantially by the markets.

That being said, we will see what happens. And, after all, markets are there to anticipate, expect, and amplify if-- if they judge appropriate to do so. So, again, big correction, we'll see what happens from now on.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Jean-Claude Trichet, former ECB president, thank you so much for your insights this morning.

JEAN-CLAUDE TRICHET: Yeah, it was a pleasure. All the best.