Jean-Claude Trichet, who ran the European Central Bank between 2003 and 2011, told AFP in an interview that the amount of debt accumulated in the current financial market made the world’s financial system as vulnerable as it was 10 years ago.
“The growth in debt, especially private debt, in advanced countries has slowed, but this slowdown has been offset by an acceleration of emerging country debt,” said Trichet, noting that this situation could be even more devastating than the financial crisis of 2008.
He also outlined that there is now agreement that the excessive debt level in the advanced economies was a key factor that triggered a global crisis in 2007 and 2008, thus this is the vulnerability of the markets that could potentially trigger a new economic meltdown.
Trichet also said that he and his colleagues at the ECB “were very much aware that we were looking at a completely systemic major global crisis” since the bankruptcy of Lehman Brothers, after which many of the market specialists believed that it was just a market correction, not expecting it to be “the detonator for the worst financial crisis since World War II.”
He argued that he told the American government that the collapse of Lehman Brothers would be devastating yet after understanding that the American government at the time did not have the political leeway to intervene with public money, he prepared for the full-scale catastrophe — and he sees the similar preconditions for it now.