– Adds Comments From Discussion With Audience

BRUSSELS (MNI) – The Eurozone needs to pool more sovereignty of
member states, including a central authority that can limit their
ability to issue debt, European Central Bank Executive Board member
Joerg Asmussen said Tuesday.

“The core of the current debate about the future of economic union
has a name: the further sharing of sovereignty,” Asmussen said in a
speech at the European Policy Center in Brussels.

Such sovereignty pooling “would imply that a euro area authority
would have competence to limit countries’ ability to issue debt and have
intervention rights into national budgets, and to compel member states
to correct their policies, be that in the fiscal, structural and
financial fields,” Asmussen said.

Asmussen said work should be done simultaneously on all “building
blocks” – financial, economic, political union – to make the EMU more
stable: “It’s clear we have an incomplete monetary union.”

At the same time, he suggested quicker progress could be made on
those reforms that do not require treaty changes, namely financial
supervision. Here the ECB is prepared to take on a supervisory role, but
only if it involves “tough supervision,” he said.

“If it’s the intention to have weak supervision, then somebody else
should do it,” he said.

Asmussen also made clear that the ECB’s supervisory role would have
to be “completely separated” from monetary policy.

“Supervision by nature is not independence,” Asmussen said, noting
it can involve working with taxpayer money. “It has to be organized in a
way that is completely separated from monetary decisions.” Still, “this
can be done,” he said, pointing to the US Federal Reserve and the Bank
of France.

“But it is of utmost importance that this framework allows the ECB
to act with effectiveness, independence and without risks to our
reputation,” he said.

Asmussen said the ECB had yet to make up its mind on how many banks
should fall under its supervision, but he did not call for the
supervisory role to involve the entire European Union: “We would focus
the supervision on the euro area.”

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

[TOPICS: M$$EC$,M$X$$$,MT$$$$]