–No Justification For Extending Mandate Of ECB
FRANKFURT (MNI) – The decisions taken recently to bring an end to
the Eurozone debt crisis have failed to address the key issues, European
Central Bank Governing Council member Jens Weidmann said on Friday.
“To work out what has to be done, we have to take a look at the
root of the crisis and there we find – among several factors – two key
items: first, deficiencies in the institutional framework of monetary
union, and second, structural deficiencies in various member states,”
the president of the Bundesbank said in the text of a speech to be given
here.
“However, the decisions taken for crisis resolution within the
monetary union have so far not addressed these two issues sufficiently,”
Weidmann said.
Noting the “in-between” approach taken by governments and the
“inconsistency” of decisions taken at the national level, Weidmann
called for policy-makers to decide in which direction the Eurozone would
go.
“The first [option] would be a return to the founding principles,
that is, taking the responsibility of individual member states in
matters of fiscal and economic policy seriously,” Weidmann said.
“For this option, it would be necessary to strengthen the current
framework in a manner that really ensures sufficient incentives for
sound public finances – therefore, the no-bail-out clause is an integral
part of this approach.”
The second option would involve “a significant shift” of
responsibilities from the national level to the European level, Weidmann
continued, adding that, in the event of non-compliance by governments,
fiscal sovereignty would also be delegated to the level of Europe, “at
least temporarily”.
“Only a clear decision for either of the two options lays the
foundation to preserve monetary union as a stability union in the long
run and to safeguard its role in the global economy,” Weidmann said.
“It is up to governments in Europe to make this decision,” he
continued. “Hence, I welcome the German government’s attempts to press
for greater political integration, including transfers of national
responsibilities.”
Weidmann also stressed that the failure of recent decisions to
contain the crisis did not justify extending the central bank’s mandate
beyond medium-term price stability.
“However, a clear commitment to our mandate is an indispensable
element of a prosperous future for the euro,” he said. “It was only for
this purpose that the Eurosystem was granted independence and this
independence is not only a right but an obligation.”
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
[TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]