As the financial world awaits the outcome of the Basel III meeting where financial supervisors will try to agree on a global overhaul of bank capital rules, the extremely forthright European Central Bank President Jean Claude Trichet has put the idea of a ‘sin bin’ forward.

Mr Trichet did not merely moot the idea, he believes that if eurozone members break rules on public finances, then they “should” be temporarily excluded from Europe’s political decision making. What makes Mr Trichet’s intent even more clear is that while the remarks were made in an interview published in the influential Financial Times, they were made just before the next European Council Summit to be held in Brussels next week.

In fact, EU President Herman Van Rompuy is due to set out possible ways forward in the coming weeks. This surely indicates that the matter will be on the table for discussion in Brussels next week. While Mr Trichet is known to be the very soul of the bulwark which is the ECB, European leaders might be shocked to hear this ‘proposal’. No doubt, there will be opposition, but Mr Trichet can count on the fact that he commands respect and that he has been so right, so many times and has been vindicated on many a stance.

He said that the financial crisis would have been much larger had the ECB bent to proposals from France and Germany back in 2004 to loosen the terms of the 1995 Maastricht Growth and Stability Pact. In his words “they wanted to destroy it”. Another bargaining chip which the ECB has is the fact that if it were not for the liquidity it is supplying to Ireland, Spain, Portugal and Greece, these economies would have collapsed.

The ECB is still providing unlimited liquidity to allow for the buying up of bonds and this will continue into early 2011. Mr Trichet points out that he was always against long drawn out spending to boost economies. While he recognised that it was needed when the crisis first blew, he says that the time is now ripe for austerity and higher productivity.

The ECB Chief also says that he never believed the eurozone was in crisis, pointing out that two years on, growth is being forecast albeit in a fragmented manner. He also makes reference to Malta, saying that the mere fact that an industrial powerhouse such as Germany being able to share a currency with a tiny island is testament to the flexibility and strength of the eurozone. Whether or not Europe will agree to Mr Trichet’s “quantum leap in politics” proposal remains to be seen. One would have to be sceptical. But Trichet still has 14 months of his eight-year presidency to go. He has an uncanny way of remaining quiet, then making a heavy political statement; while having already slowly done the groundwork necessary to support his decision.

We have seen it time and time again. Of course, the ECB Chief will posture, and his proposals – as in the past – will be watered down. However, one would not at all be surprised if it is an issue of demanding X, when in reality, what is being aimed for is a lot less than X. If this is the case, then Trichet has won the battle already.