EUROPEAN CENTRAL Bank president Jean-Claude Trichet has proposed a “deeper and authoritative” role for the EU over the economic affairs of member states with finances that “go harmfully astray”.
Mr Trichet suggested a rethink on economic sovereignty was necessary to find a new balance between “the independence of countries and the interdependence of their actions” in a common currency bloc.
To safeguard the euro he floated the idea of a “veto” for EU leaders over national economic policy and – “tomorrow, or the day after tomorrow” – a central EU finance ministry.
“Would it go too far if we envisaged . . . giving euro area authorities a much deeper and authoritative, say in the formation of the country’s economic policies if these go harmfully astray?” asked Mr Trichet, suggesting “a direct influence, well over and above the reinforced surveillance that is presently envisaged?”
Mr Trichet’s proposals – carefully phrased as hypothetical ideas – came in a speech in Aachen yesterday where he was awarded the prestigious Karlspreis for services to European unity.
The central banker’s boldest suggestion was a “new concept” for the euro zone that envisioned cases of “compulsory” intervention from EU leaders and the ECB in “major fiscal spending items and elements essential for the country’s competitiveness”.
“Confronting the challenges of the future requires strengthening the institutions of economic union – the ‘E’ in EMU,” he said. “Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the Union?”
In Mr Trichet’s view, this EU finance ministry need not administer a budget but monitor directly fiscal and competitiveness policies. This ministry could ensure closer integration of financial services across the EU and sit on boards of international financial institutions.
In a speech shot through with a valedictory tone, Mr Trichet, who stands down in October, said the Frankfurt central bank was a “shining example of professionalism and team spirit”, headed by a governing council that had shown “conviction and responsibility” in the financial crisis.
The bank’s “steadfast commitment” to price stability meant that inflation in the euro’s first 12 years was lower than in half a century of national currencies.
Mr Trichet denied there was a “crisis of the euro”, insisting that the single currency had brought steady growth, jobs and a trade boost – intra-EU trade rose 50 per cent in the first years of the euro.
His remarks come as Greece remains under pressure to redouble its reform efforts in exchange for further instalments of bailout funds.
ECB chief economist Jürgen Stark, in an interview with Italy’s Il Sore 24 Ore, repeated the suggestion of external budgetary intervention. “If countries in difficulty do not introduce the necessary adjustment measures, then interfering in their national policy could be a necessary way of ensuring the correct functioning of monetary union,” said Mr Stark.
