LONDON (MNI) – The reform of the European Union’s economic
governance agreed late last month shows that European leaders recognize
the need to strengthen economic governance, but the proposals fall short
of what the European Central Bank feels is necessary, ECB Executive
Board member Gertrude Tumpel-Gugerell said on Tuesday.

“The proposals put forward by President van Rompuy represent a
strengthening of the existing framework for fiscal and macroeconomic
surveillance in the European Union,” Tumpel-Gugerell said in a speech
given here.

“However, the Governing Council feels that they do not go far
enough to be the quantum leap forward in the economic governance of
Monetary Union that it has been calling for.”

Tumpel-Gugerell stressed that proper surveillance of macro-economic
policies required a new peer surveillance system, “concentrating firmly
on euro area countries experiencing sustained losses of competitiveness
and large current account deficits, as these countries face the greatest
sustainability challenges.”

The central banker said that competitiveness should be included as
an indicator for surveillance at the European level.

Tumpel-Gugerell highlighted that money markets had shown
improvement, which permitted the ECB to withdraw some of its liquidity
support. She also noted that a positive outlook for Eurozone economic
growth was supported by an improvement both in households’ income and
firms’ balance sheets, which would offset further government
consolidation efforts.

While no breakdown was currently available, Tumpel-Gugerell noted
that the economic recovery in the Eurozone continued in 3Q.

“Looking beyond the third quarter, survey indicators, such as the
Purchasing Managers index (PMI) and European Commission business
surveys for the manufacturing and the services sectors, point to ongoing
growth in October,” Tumpel-Gugerell said.

Turning to inflation, the central banker reiterated that price
stability would be maintained over the ECB’s policy-relevant horizon,
while inflation expectations remained “firmly anchored” in line with the
ECB’s target.

— Frankfurt bureau; +49-69-720 142; email: frankfurt@marketnews.com —

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