ECB head has 'grave concerns' on eurozone governance

18th November 2010, Comments 0 comments

The head of the European Central Bank Thursday expressed his "grave concerns" about economic governance in the euro area in what he called an "exceptionally demanding and uncertain" environment.

Speaking at a central banking conference here, Jean-Claude Trichet recalled that the ECB had expressed worries about the weakening of the Stability and Growth Pact, which seeks to limit the budget deficits of member states.

"I am sending this message, as solemnly today, as in 2005 when I expressed, on behalf of the Governing Council, those grave concerns that I just quoted," Trichet said.

"In the past days, taking into account the lessons of the global crisis, in particular as regards its impact on the European single market and in the single currency area, we have called, and are still calling, for a quantum leap of governance," he added.

Describing the current situation on the financial markets and the real economy as "exceptionally demanding and uncertain," he stressed it was all the more important "to preserve and reinforce the authority of public authorities."

Trichet was speaking as officials from the European Union and the International Monetary Fund were in Ireland assessing the financial situation of the debt-wracked country.

Ireland could receive "tens of billions" of euros as part of a bailout, the country's central bank governor said earlier Thursday.

However, despite huge international pressure, Ireland's leaders have still not committed to accepting an aid package amid concerns about how conditions attached to such a loan might affect domestic issues such as its tax policy.

But the EU is extremely concerned that Ireland's weakness could lead to a contagion that could drag down among other heavily indebted economies in the 16-nation eurozone such as Spain and Portugal.

© 2010 AFP

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