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Trichet demands "quantum leap" on eurozone reforms

Tuesday 28 September 2010 - by Will Henley

Jean-Claude Trichet, president of the European Central Bank, has warned euro member governments that they must enthusiastically back reforms to the governance of Europe’s monetary union to avert another Greece-style crisis.

Raising the prospect of a treaty change to the European Parliament’s Economic and Monetary Affairs Committee this week, Trichet called for a “quantum leap” as he set out a list of five questions, covering budgetary and macroeconomic surveillance, which he said member governments must answer in the coming months.

He said: [On] reinforced budgetary surveillance and a new macroeconomic surveillance framework, more ambition is required. Both for the ECB and for euro area governments, the central objective must be to achieve all that is necessary to ensure the smooth functioning of our monetary union.

“Short of an immediate or rapid treaty change, we have to exploit to the maximum all the possibilities for EU secondary legislation under the current Treaty to achieve this quantum leap,” he said.

Trichet commended MEPs for their approval last week of a new EU supervisory reform package, saying that the creation of the European Systemic Risk Board and European Supervisory Authorities, and a new Capital Requirements Directive, would make the regulatory and supervisory framework “more robust”.


But he added that much work still had to be done, noting that MEPs had an important role to play.

“There is considerable political momentum at global and EU level for strengthening regulation and oversight. We need to sustain this momentum because there is still a great deal of work to do, particularly in terms of implementation," he said.

Firing a warning shot to national governments, Trichet said that the ECB would not tolerate a “timid” response to the following questions:

• "First, does the fiscal surveillance framework effectively address the weaknesses that might give rise to a future crisis?

• Second, is there an macroeconomic surveillance framework that can trigger effective adjustment of imbalances, of external indebtedness and of losses of competitiveness?

• Third, are the enforcement mechanisms of fiscal and macroeconomic surveillance quasi-automatic and the enlarged sanctions sufficient to protect other members and the monetary union as a whole?

• Fourth, does the framework include appropriate independence in surveillance, and impeccable quality checks of analysis and statistics?

• And finally: are the new principles of economic governance anchored within national frameworks?"


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