European Central Bank President Jean-Claude Trichet said the euro-area sovereign debt crisis shows the region needs tougher economic and budget rules.
“The economic-governance framework devised in the 1990s has not been implemented and, in any case, has proved too weak during the crisis,” Trichet said in a speech delivered at the London School of Economics today. “The crisis has exposed a clear need for strong reform.”
European policy makers are debating how to strengthen legislation after three euro-area countries, Greece, Ireland, Portugal, required a bailout. Trichet is currently embroiled in a stand-off with German Finance Minister Wolfgang Schaeuble over investors’ possible role in the second Greek rescue in just over a year.
“The existing economic-governance framework has been incorrectly implemented and, more importantly, has proved to be insufficiently binding while lacking appropriate comprehensiveness,” Trichet said.
The ECB wants tougher budget rules with “faster and more automatic sanctions” for those breaching European Union guidelines on budget deficits, Trichet said. France and Germany have said that penalties against budget violators should be left in political hands.
“The experience of the past months has vividly demonstrated the importance of a timely correction of internal and external imbalances,” Trichet said.
He also called on governments to “bring national policies in line with membership of a currency union.”
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