BRUSSELS (MNI) – The EU treaty should be changed to allow the
European Central Bank to intervene in markets to protect Eurozone member
states threatened by the spillover effects of crises, Polish Finance
Minister Jacek Rostowski, the current chairman of EU finance ministers’
meetings, said on Tuesday.

Rostowski told the European Parliament that in his view “there is
nothing to prevent the ECB from behaving that way under current
treaties,” but he said that since this was unclear to others, the ECB’s
mandate should be changed, so that it could “intervened as an
independent central bank when the integrity of the Eurozone or a member
state is threatened by spillover effects.”

The current crisis is a “crisis of contagion, not just a crisis of
mistaken public finance policies,” he argued.

Germany and the ECB itself believe that the EU treaty’s strict
prohibition against “monetary financing” of governments by the central
bank prevent the institution from the sort of large-scale market
intervention undertaken by other central banks such as the US Federal
Reserve and the Bank of England.

Poland, France and some other EU countries, as well as European
Commission officials, have argued that more intervention by the ECB
would be the most effective way of stemming the spread of the sovereign
debt crisis and restoring market confidence.

Rostowski said that to describe the Eurozone’s “firewalls” — the
European Financial Stability Facility and the European Stability
Mechanism — as only “part-built” was “a charitable way of putting it.”
The failure to build stronger barriers against contagion “has created
serious problems,” he added.

“If we had proper firewalls in place, PSI would not have been a
problem and the bank recapitalization measure would not have been a
problem,” he said.

The president of the Ecofin, who will step down at the end of the
year when Denmark takes over the rotating presidency of the EU from
Poland, said that the EU summit December 9 has now made it possible to
see “the first glimmer of light at the end of the tunnel.”

“After 18 months of very resolutely and in a determined manner
going in exactly the wrong direction, we are now finally headed in the
right direction,” he said.

–Brussels bureau: +324-9522-8374; pkoh@marketnews.com

[TOPICS: M$$CR$,MGX$$$,M$X$$$]