October 22, 2020

Trichet Calls for E.U. Finance Ministry to Curb Future Euro Crises

“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?” Mr. Trichet said in Aachen, where he accepted a prize named for Charlemagne, the 9th century king who united much of Continental Europe.

Since last year Mr. Trichet has been urging European political leaders to make a “quantum leap” in the way that the euro area is governed, to avert grave crises like the one caused by Greek debt. Mr. Trichet has often expressed disappointment that leaders have not gone further.

Mr. Trichet said Thursday that the European finance ministry would not necessarily oversee a large budget, but would be responsible for monitoring national finances and intervening in extreme cases. The ministry would also monitor whether nations are pursuing the right policies to be competitive, and oversee the European financial sector.

Mr. Trichet acknowledged that creation of such an entity would require a change in the European Union treaty, and there would certainly be a lengthy debate before any such ministry could be created. National leaders are usually very reluctant to cede power to the European Union.

The proposal was unusually provocative for Mr. Trichet, who is acutely aware that his words can shake financial markets and tends to use the same carefully worded phrases whenever he speaks in public, which is often.

But as he enters the final months of his term as E.C.B. president, after several trying years as the euro area’s de facto crisis manager, Mr. Trichet appears to be pushing harder for permanent changes to the way the European Union operates.

In a speech that quoted thinkers ranging from Immanuel Kant to William Penn, Mr. Trichet said that countries in trouble should first receive financial support and help getting back on their feet.

“It is appropriate to give countries an opportunity to put the situation right themselves and to restore stability,” Mr. Trichet said, according to a text of his remarks. “Such assistance is in the interests of the euro area as a whole, as it prevents crises spreading in a way that could cause harm to other countries.”

“But if a country is still not delivering,” he added, “I think all would agree that the second stage has to be different.”

In that case, E.U. leaders should have more authority over the actions of other members, he said. For example, they might be given veto power over spending by a troubled country or its economic policies.

Mr. Trichet did not mention Greece by name, but his comments came amid increasing doubt that the country is making enough progress in selling state assets, making the economy more competitive, and taking other measures needed to get its debt under control.

The ratings agency Moody’s late Wednesday slashed its rating of Greek government debt once again, well below the level considered investment grade.

Current events, Mr. Trichet said, demonstrate that European countries “can experience crises caused entirely by the unsound economic policies of others.”

Article source: http://www.nytimes.com/2011/06/03/business/global/03euro.html?partner=rss&emc=rss

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