NEWSMAKERS

• Passport Palaver
• Trichet Trial Begins
• Change In China
• BIS Boss
• Pantomime Over
• Coming In From The Cold

Passport Palaver
Wim Duisenberg has once again been unwittingly embroiled in controversy as a consequence of his wife Gretta’s fervent support for the Palestinian cause. Following the rumpus last May when Gretta got in trouble for festooning the façade of the couple’s home with the Palestinian pennant, and for making alleged anti-Semitic remarks in October, her most recent exploits have now for the first time actually prompted the ECB president publicly to put a good word in for his spouse, gallantly declaring that “I am 100 percent behind her.”

When Gretta, who chairs a pro-Palestinian group called “Stop the Occupation”, met and lunched with Palestinian leader Yasser Arafat this week, she raised a few hackles by exhorting Israel to withdraw from the West Bank and the Gaza Strip, as well as saying that she empathised with suicide bombers although she also urged this to stop. Her detractors were quick to pounce on the fact that she was travelling on a diplomatic passport that was only issued to her because of her husband’s status, and they complained that she was cynically misusing her husband’s distinguished name to partisan ends. She, however, asserts that she is a free agent with a right to express her own opinions.

But exasperated Wim felt compelled to write a letter to the Dutch foreign minister, who had complained about the use of her passport, setting the matter to rights. He couldn’t contain himself any longer: “Up to now I have, as befits my position, kept out of the activities of my wife.” However he felt obliged to point out that the accusations were a bit unfair, if only because his wife wasn’t actually supposed to use her regular passport which she had had to turn in years ago. He explained: “My wife got her diplomatic passport in 1987, the year we were married, in relation to my position as the president of the Dutch Central Bank, and not, as suggested, as part of my job as the ECB president.” Her regular passport, which is locked up in a safe in at the Dutch consulate in Frankfurt, is reserved for use when going to countries where showing a diplomatic passport could create genuine problems.

Gretta refuses even to discuss the issue, arguing that her enemies are just trying to make her mission difficult in any way possible. Israel says that her views are biased and that she is not welcome, while a Dutch foreign ministry spokesman says, “she is not a credible person... because she is completely one-sided.” She has also received several death threats, and following the Palestinian flag-flying incident, one Dutch journalist thought it would be a good gag to garland the Duisenbergs’ home with an Israeli flag. Although he failed in his attempt, Wim Duisenberg said his actions were “sickening” and that he felt very threatened. But Gretta’s efforts are not completely in vain, and there are those who appreciate what she does: in December she was awarded a human rights award from the Belgian “League for Human Rights”, in recognition of her endeavours to spotlight Palestinian human rights.

Trichet Trial Begins
The future of Jean-Claude Trichet’s central banking career, and perhaps even the good name of the ECB, is hanging on a knife-edge. Whether or not France’s high court deems Trichet guilty of complicity in corrupt practices as charged over the next six weeks may have a significant bearing on the credibility of one of Europe’s key institutions. Will the ECB end up with egg on its face when it suddenly transpires that its long-chosen candidate to succeed Wim Duisenberg is not eligible for the job? If not Trichet then who? There are a number of possible candidates, but whether or not they will line up in an orderly fashion is quite another thing.

But none of this is anything new. Trichet is on trial for something he is accused of doing a decade ago. As is by now pretty well known, Trichet is accused of getting his hands dirty in the cover-up of colossal losses during the state bailout of Credit Lyonnais. His prosecutors say he was party to disseminating false information to the markets and publishing vague accounting records. Trichet’s lawyers say he neither had the information nor the authority to do anything about this.

But why, even the most reasonable people are scratching their heads, has it been left only until now, just months before France has a unique chance to get their star player into the ECB presidency, to try this case? Surely, the matter could have been settled years ago. He was only placed under investigation in 2000, seven years after the incident took place. To make matters worse, when the French public prosecutor recommended last May that the case be dismissed, the investigating magistrate bafflingly then overruled the recommendation in July. As if this wasn’t enough, with the clock ticking, the trial has just been postponed by four days owing to certain complications caused by parallel investigations into the matter. What is more, there is a danger that the trial will be postponed further to allow more time for prosecutors to examine fresh evidence arising from an accountancy report released in October.

This puts the euro area governments in a pickle. All this rumour-mongering and press speculation on possible new ECB presidents - and whether or not the next one has to be French - highlights the political nature of the appointment process. Of course, that kind of top appointment has to be decided at the level of finance ministers/heads of government. But the horse-trading that will go on if Trichet cannot succeed, with the French asserting that it had been agreed that the next one would be French and others disagreeing, will only undermine the ECB's credibility. It reminds us that many politicians, like President Chirac (whom some French observers blame for the whole debacle), have never really accepted central banking independence.

Wim Duisenberg had promised to step down from the ECB in July on his 68th birthday. Although he has now reluctantly agreed to stay on until a successor has been confirmed, he says that he “just wants to go fishing”.

BIS Boss
There is another change at the top on the cards. On Monday it will be announced who is to succeed Andrew Crockett as general manager of the Bank for International Settlements. The selection committee has been scouring the globe for months for a suitable candidate, and the competition is fierce. The selectors themselves would make worthy candidates, but we can presumably rule them out. It is headed by Nout Wellink, BIS chairman and governor of the Dutch central bank, and he is being assisted in his search by Yutaka Yamaguchi, Antonio Fazio, Roger Ferguson and Jean-Pierre Roth. Who they come up with is anybody’s guess, and Newsmakers will not be so rash as to speculate at this late stage who is likely to be chosen. In any case, by the time you read this you probably already know. For those who don’t, look out for Arminio Fraga’s name in the headlines (who has just left the central bank of Brazil) - although many think that the BIS may not be ready to appoint someone from outside the G-10 just yet (of the eight heads of the BIS to date there have been five Frenchmen, one German, one Belgian, and one Briton), despite the fact that Crockett is praised for converting the organisation from a European-dominated body into a global institution. Consequently some think that someone like Urban Backstrom would be a better bet. We’ll just have to wait and see.