PARIS (MNI) – ECB President Jean-Claude Trichet on Wednesday lent
support to the European Commission’s new proposals for closer
surveillance of eurozone government budgets in order to restore the
confidence of investors.
“The Commission is right to make proposals,” Trichet said in a
television interview, arguing that budget surveillance is an “essential
element” of monetary union. “If we want things to go well…we must be
very attentive.”
Surveillance must be backed by the power to impose sanctions on
wayward governments and to monitor their application, he said, but ruled
out excluding members from EMU as an ultimate resort.
The ECB is not demanding austerity policies of governments but
rather a return to budgetary “wisdom”, he said.
The central bank’s controversial decision to purchase public and
private debt in secondary markets in no way represents a change in its
monetary policy but simply a means to assure the transmission of that
policy, he insisted. “Our goal is to re-establish the normal functioning
of markets.”
Trichet reiterated that liquidity would not increase as a result of
such purchases and the price stability would remain assured.
The issuance of eurobonds to finance governments is not
“envisioned” in the future and would run counter to the goal of
reinforcing responsibility in budget policy by blurring the market’s
visibility and response to individual government’s fiscal situation, he
explained.
Trichet declined comment on a newspaper report that one condition
for Germany’s acceptance of the new EU stability program was an
agreement among governments that Bundesbank President Axel Weber would
become his successor at the helm of the ECB and noted the German
government itself had denied the rumor.
–Paris newsroom +331 42 71 55 40 e-mail stephen@marketnews.com
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