EXPECTATION IS building that the European Central Bank will take new steps to calm the debt crisis after French president Nicolas Sarkozy said he was certain the bank would face up to its “responsibility” and ECB president Mario Draghi left the door open to such a move.
Mr Sarkozy’s declaration that he was convinced the ECB would act came in a speech in which he implicitly criticised Ireland’s corporate tax policies and said looming changes to the EU treaties would “refound and rethink” Europe.
Ahead of a key European summit next week, Mr Draghi fanned anticipation of a new ECB intervention by saying “other elements might follow” moves by EU leaders to toughen the enforcement of budget rules.
“There’s growing expectation that the ECB will, in full independence, take the decisions needed in light of the situation,” said a senior European source who is deeply involved in preparations for the summit.
The ECB has been resisting pressure to adopt the mantle of lender of last resort in the euro zone.
However, the source said there appeared to be no alternative to a new manoeuvre by the bank, after a bid to boost Europe’s bailout fund fell short.
In the French city of Toulon last night, Mr Sarkozy said the ECB had a decisive role to play in the crisis.
“I am convinced that, faced with the deflationary risk that threatens Europe, the ECB will act. It’s for the bank to decide when and with what means. That’s its responsibility,” he told a rally.
“But let me share a conviction with you: let no one doubt that it will take up its responsibility. Indeed, I welcome that it has begun to do so.”
This was seen as a reference to remarks Mr Draghi made yesterday in Brussels. In the European Parliament, he indicated there was scope for the ECB to act if governments moved first to adopt a “fiscal compact” to strengthen the governance of the euro zone.
“We might be asked whether a new fiscal compact would be enough to stabilise markets and how a credible longer-term vision can be helpful in the short term,” he said.
“Our answer is that it is definitely the most important element to start restoring credibility. Other elements might follow, but the sequencing matters,” Mr Draghi added.
Mr Sarkozy’s speech was billed as a major contribution to the debate on the debt emergency.
“We are not hiding it. Europe could be swept away by the crisis if it does not get a grip, if it does not change,” he said.
He and German chancellor Angela Merkel, the dominant political figures in the crisis, remain at odds over key elements of their response to the crisis.
They will attempt to settle their differences at a meeting next Monday in Paris.
Mr Sarkozy said France and Germany wanted “more solidarity and more discipline” in Europe and he took an implicit swipe at Ireland’s corporate tax regime, long a target of his political rhetoric.
He criticised “a Europe that tolerates the subventions it gives to certain members, in order for them to catch up with the rest, being used to reduce charges and taxes, and to compete disloyally with the others.”
He went on to say “this can no longer continue.”
In spite of their increased anxiety about the debt crisis, European leaders are wary of making demands of the ECB, as they do not want to infringe on its independence.
“The more you try to put pressure on the ECB the more likely it is to want to assert its independence,” said EU competition commissioner Joaquín Almunia.