FRANKFURT (MNI) – The following is the second part of a verbatim
text of the introductory statement by European Central Bank President
Jean-Claude Trichet before the Committee on Economic and Monetary
Affairs of the European Parliament in Brussels on Monday:
III. Economic governance at a crossroads
You have asked me to speak about enhanced economic coordination and
surveillance in the euro area.
The ECB believes that a true quantum leap is needed in the
framework for surveillance and adjustment of fiscal policies, as well as
broader macroeconomic policies concerned with Europes competitiveness.
La solidarit de fait that Robert Schuman called for 60 years
ago is reflected in the degree of economic integration and
interdependence already achieved in Monetary Union. But solidarity is a
two-way street. The benefits and protection that are derived from
membership of Monetary Union bring with them responsibilities and
obligations. This is the fundamental contract which forms the basis for
our currency. We now have to turn it into a more effective structure for
fiscal and macroeconomic surveillance and adjustment.
In line with the topics addressed by the task force chaired by
European Council President van Rompuy, let me focus here on two main
areas of reform. A third area, a crisis management framework, is still
to be examined at the level of the task force.
First, it is of the essence that the surveillance of budgetary
policies be strengthened. I am pleased to note that the European Council
confirmed this assessment at its meeting last Thursday.
At the level of the EU27, and in particular within the euro area,
we must have effective instruments to prevent and, where necessary,
correct excessive deficits and debt levels. A more stringent
implementation of rules and procedures is essential, among other things
by increasing the automaticity and speed of procedural steps. The
initiation of sanctions also needs to be quasi-automatic.
Fiscal surveillance must be more direct and effective. It must also
be based on more independent monitoring and assessment. We may need a
differentiated approach to surveillance depending on the fiscal
performance of countries. The Commission should have greater
responsibility by making proposals, which can only be modified with
unanimity in the Council, rather than mere recommendations under the
Stability and Growth Pact.
In the event of non-compliance, sanctions need to be applied much
earlier and to be broader in scope. They should not only address
excessive debt ratios, but also apply when countries are not making
sufficient progress towards medium-term budgetary objectives. A wider
spectrum of financial sanctions needs to be considered, along with
non-financial and procedural sanctions, such as more stringent reporting
requirements or even a limitation or suspension of voting rights.
The second area may appear more novel, both at the level of the
European Union and at the level of the euro area, but the ECB has in
fact been stressing it in the Eurogroup since at least 2005: the
surveillance of policies to maintain Europes internal and external
competitiveness policies to raise productivity, to enhance peoples
skills and to improve firms competitiveness. These policies go well
beyond the tradable sector. They must also encompass the non-tradable
sector, including the public sector, since it too is decisive for the
competitiveness of an economy as a whole.
Conscious management of wages and costs in order to maintain a
healthy position for the economy within a competitive environment this
should be the core focus of such broader macroeconomic surveillance. The
reason why competitiveness should be the main focus is not that
countries should pursue export-oriented policies or boost international
market share. The reason is that within a monetary union, the relative
competitiveness of economies captures very well the sustainability of
price and cost developments.
I am pleased that last Thursdays European Council confirmed the
need for an effective surveillance framework in this area. Experience
has shown that persistent divergence in this regard is detrimental both
for Member States and for Monetary Union as a whole.
As with fiscal surveillance, this framework needs to allow for
targeted and differentiated surveillance and follow-up measures. For
countries that experience significant losses of competitiveness,
surveillance should become increasingly deep and detailed. More ad hoc
reporting and dedicated country missions, policy recommendations,
compliance requirements, public peer pressure and gradual financial
steps to encourage compliance could all be part of that process.
For this to work, we need a transparent and effective trigger
mechanism to determine the intensity of vulnerabilities and
surveillance. This should be based on close monitoring and reporting by
both the Commission and the ECB. Experts are currently developing ways
to best capture the complexity of the issue, as well as procedures by
which indicators could be used in a surveillance and adjustment
If we can put in place effective surveillance and adjustment
frameworks for both fiscal and competitiveness policies and if we can
ensure through appropriate regulation that our financial system serves
the real economy and not the other way around our European Union and
our Economic and Monetary Union will exit this crisis much stronger than
before and will be very well placed in the global economy. IV.
Let me conclude by saying that as we steer a course through these
difficult times, we must clearly all work hard, but we must also
maintain our ambition. This means that decisions need to be proportional
to the importance of the Union.
A single market of 500 million citizens and an Economic and
Monetary Union of 330 million citizens which are among the largest and
most advanced economies in the world and which are built on solid
foundations in terms of human and social capital cannot and should not
be measured according to the strengths or weaknesses of their individual
components alone. Particularly as regards Economic and Monetary Union,
policy-makers need to internalise what it means to be part of a monetary
union, in words and in deeds.
I therefore very much welcome the calls by this Parliament for
ambitious reforms. The reaction of Europe in times of crisis has always
been to strengthen European cohesion. I would like to urge you, as
Members of the European Parliament, as the representatives of Europes
citizens, to continue to give your support to that course of action.
Thank you for your attention.