BRUSSELS (MNI) – Some sanctions for the European Union’s fiscal
rule breakers can be easily imposed within the current legal framework,
but others could require a change in the Treaty, European Central Bank
President Jean-Claude Trichet said on Monday.

Appearing before lawmakers in the European Parliament, Trichet
called for more sanctions on countries that break the EU fiscal rules
set out in the stability and growth pact, more scrutiny of statistics,
and incentives to encourage EU members to behave.

“There are some sanctions which can be easily expanded within the
current treaty…and others that might be more difficult,” Trichet said.

“In having a single currency without having political federation…
we have been very bold,” the ECB President said. “We have to get the
best possible framework for controlling and enhancing surveillance,” he
said.

Trichet said the ECB “would be in favour” of suspending the EU
voting rights of rule-breaking members.

“Of course it is something which is not a financial sanction but
has a big, big impact. But it’s possible it needs a change of treaty,”
he said.

Trichet said the ECB wants more emphasis on both debt and deficit
levels and “also a reversal of the burden of the proof,” so that
sanctions would be semi-automatic — ie, imposed and only lifted if
member states voted to do so, rather than imposed only if members voted
for them.

“Until now the debt criteria has been much forgotten and we must
play on the two… debt and deficit together, because, again, it is
fundamental to the situation where you have to improve confidence, gain
confidence, consolidate confidence,” Trichet said.

“What has been lacking is some kind of incentive to manage finances
responsibly,” he added. “The stability and growth pact has not been a
shining example; we haven’t seen best practices; we haven’t seen any
kind of competition to do better than others. In fact we’ve seen
attempts to blow the whole system up,” the ECB President said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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