FRANKFURT (MNI) – The following is the second part of a text of
European Central Bank President Jean-Claude Trichet’s opening statement
to the Economic and Monetary Affairs committee of the European
Parliament in Brussels on Tuesday:

“Finally, European commitments are also national commitments, and
will naturally continue to be scrutinised within national fiscal
frameworks. On this, even if the proposed Directives minimum standards
are broadly acceptable, I see the requirements spelled out as an
absolute minimum. For example, the Directive could be more ambitious on
the need for independent forecasts and assessment of fiscal policy, and
on the transposition date into national law. Let me now turn to the
proposals on macroeconomic imbalances. The development of a
fully-fledged macroeconomic surveillance framework for the EU, and even
more so, the euro area closes an important gap in the current governance
set-up. The new mechanism is essential for macro-financial stability.
Overall, internal macroeconomic imbalances should be defined in order to
focus on Member States which have experienced persistent competitiveness
losses and/or large current account deficits.

Second, the specific nature of imbalances needs clear
identification on the basis of both appropriate indicators and
thresholds. Otherwise, any relevant discussion could prove meaningless.
Moreover, the procedures should ensure linking the outcome of the
indicator-based scoreboard more directly to the conduct of in-depth
reviews and surveillance missions by the Commission, in both the
preventive and corrective arm, and in liaison with the ECB for euro area
and ERM II Member States.

Furthermore, sanctions under the corrective arm of macroeconomic
surveillance would come too late in the process, only after repeated
non-compliance by a Member State; they should be applied earlier and
more gradually in order to provide clear and credible incentives.
Finally, there are again risks entailed in allowing sanctions to be
reduced or cancelled on the basis of ‘exceptional economic
circumstances’. For all these reasons, I would call on the Parliament to
be ambitious and timely with this legislative package. And to ensure an
appropriately effective surveillance framework, both in terms of fiscal
consolidation and the surveillance of macroeconomic imbalances, and
especially as regards euro area members. Finally, a few words on the
European Stability Mechanism mentioned by the Eurogroup last Sunday.

You know that, since 28 October, I had called upon governments to
clarify their position and avoid ambiguity vis-a-vis investors, savers
and market participants. In stating very explicitly that Europe will be
‘fully consistent with IMF policy’ and ‘IMF practices’ as regards
private sector involvement, the position made public by governments last
Sunday is a useful clarification.

III. Financial Sector Issues

Let me allow a few remarks on financial sector issues. Much
progress has been achieved since the latest regulatory reform agenda was
adopted. The endorsement of the regulatory reforms by the G20 Leaders
Ministers and Governors and by the meeting of the Heads earlier this
month has added to the commitment of all global participants. The
reforms constitute an important step forward in strengthening the
resilience of the financial system. In this context, let me highlight
three issues.

Firstly, the new Basel III framework, as endorsed by the Group of
Governors of Central Banks and Heads of Supervisors, forms a cornerstone
of the financial reform. In order to reap the full benefits of this
reform, consistent implementation and application at international level
will be essential. In this context, while the CRD IV could address EU
specificities, it is important that it is fully consistent with the
Basel III framework. Let me also underline the importance of the agreed
transition period.

Secondly, as regards the Alternative Investment Fund Managers
Directive (AIFMD), I would like to emphasise the importance of creating
a convergent oversight in the EU and the US, resulting in an
international level playing field. In addition, as there are still
several regulatory initiatives underway, both internationally and at EU
level, it is important to ensure that their overall impact achieves the
desired results without hampering economic recovery. Lastly, the
European System of Financial Supervision, which includes the ESRB and
the ESAs, will start on 1 January 2011. We are preparing for a smooth
interplay between the ESRB and the ESAs. To ensure this goal a
constructive dialogue is under way in the areas of systemic risk
analysis and information exchange between the relevant parties. I trust
that the ESRB will introduce a new policy function at the EU level with
great potential for enhancing the ability of European and national
authorities to safeguard the stability of the EU financial system as a
whole. I thank you for your attention.”

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