April 20, 2024

Trichet Urges Creation of Euro Oversight Panel

The creation of such an entity would require a change in the European Union treaty, and there would certainly be a lengthy debate.

But Chancellor Angela Merkel of Germany said on Thursday in Singapore that members of the euro area needed to work together more closely, perhaps indicating an openness to the idea.

As the debt crisis has strained European relations over the last couple of years, many economists have suggested that Europe must move beyond its unusual structure or else the union could risk being torn apart. The current structure, allowing each country a great deal of fiscal autonomy, will lead to future crises like the one now enveloping Greece, Ireland and Portugal, they contend.

Mr. Trichet has also been urging European political leaders to make a “quantum leap” in the way that the euro area is governed and expressed disappointment that they have not gone further. On Thursday, he was more specific.

“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 asked in Aachen, Germany, where he accepted a prize named for Charlemagne, who united much of Continental Europe.

A European finance ministry would not necessarily oversee a large budget, he said, but would be responsible for monitoring national finances and intervening in extreme cases. The ministry would also monitor whether countries were pursuing the right policies to be competitive, and oversee the European financial sector.

Mr. Trichet’s proposal may reflect frustration that the central bank has often had to take the lead in coping with Greece’s problems, including buying Greek government debt on the open market and becoming the country’s biggest creditor. With a central finance ministry, the European Union could step into a bigger role in the future.

Officials are now wrestling over terms of a second aid package for Greece. Greek government officials and visiting representatives from the European Central Bank, European Union and International Monetary Fund are considering additional austerity measures that would include a faster sale of state assets, tax increases and cuts to public-sector spending.

So far, Mr. Trichet has refused to consider allowing Greece to restructure its debt, but other members of the central bank’s governing council seemed to entertain the possibility on Thursday that owners of Greek bonds might someday contribute to a solution.

“We have never refused every form of private-sector involvement in Greece,” Vitor Constâncio, the vice president of the European Central Bank, said in Aachen, according to Reuters.

As he enters the final months of his term as central bank president, Mr. Trichet is stepping up the pressure for permanent changes to the way the union operates.

In a speech that quoted thinkers like Kant and 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,” he said, according to a text of his remarks.

“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, European Union 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.

Late Wednesday, the Greek Finance Ministry expressed irritation at the timing of a decision by Moody’s to downgrade Greek debt, yet again, while the talks continued over an additional 60 billion euros in aid.

“Moody’s decision to downgrade Greece comes as representatives of the E.U., E.C.B. and I.M.F. are in Greece to evaluate the country’s economic program,” the ministry said. The three organizations, known locally as the troika, last year pledged 110 billion euros, or $159 billion, in loans to save the country from default.

A review by inspectors, to be completed within days, is to determine whether Greece will receive the fifth installment of the original loan package, valued at 12 billion euros.

The review will be the focus of talks Friday in Luxembourg between the Greek prime minister, George A. Papandreou, and Jean-Claude Juncker, chairman of the Eurogroup, a forum for the 17 members of the euro area.

Public opposition in Greece to the government’s austerity drive has been increasing over the last week. Daily protests in front of Parliament have been relatively small but are growing.

The rallies, in Athens and other major cities, have been modeled on a Spanish campaign that brought thousands of mainly young protesters to city squares and have been organized through social networking sites without the involvement of labor unions, which usually lead Greek demonstrations.

Separately, Spain sold 4 billion euros of bonds on Thursday, meeting the maximum target the Treasury set for the sale, Bloomberg News reported.

Jack Ewing reported from Frankfurt and Niki Kitsantonis from Athens.

Article source: http://feeds.nytimes.com/click.phdo?i=1f46fb74b59480d246002680dc57b861

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