ECB chief bangs anti-deficit drum

4th June 2007, Comments 0 comments

BRUSSELS, June 4, 2007 (AFP) - European Central Bank chief Jean-Claude Trichet insisted on Monday that eurozone countries must respect the EU's rules curbing overspending, in a message apparently directed at the new French government.

BRUSSELS, June 4, 2007 (AFP) - European Central Bank chief Jean-Claude Trichet insisted on Monday that eurozone countries must respect the EU's rules curbing overspending, in a message apparently directed at the new French government.

"We attach great importance to implementing the Stability and Growth Pact in its entirety," said Trichet, ahead of the monthly meeting of eurozone finance ministers, adding that compliance was absolutely essential to the coherence of the zone.

"In all countries where there is a high level of public spending, we have to ask whether this represents an optimum position," he said, at a forum held by the Lisbon Council think-tank in Brussls.

The new French Budget Minister Eric Woerth said last month that he favoured a "pause" in cutting back the budget deficit so as to make room for extra spending on investment.

His comment was among a series of signals from senior government figures that cutting the deficit further is not an immediate priority for the new administration.

Trichet said the ministers from the 13-nation eurozone would hear later what Woerth had to say on the subject.

French President Nicolas Sarkozy, in the run-up to his election last month, said the overall results of his five-year presidential term would be what counted, not immediately cutting the deficit.

France reduced its state overspending, known as the public deficit, in 2005 to within the 3.0 percent limit set by the stability pact.

The rules are intended to lead countries to build up budget surpluses in times of growth. The public deficit -- or surplus, as the case may be -- covers spending by central government, social security administrations and local authorities.

Trichet added that any change in the way the euro zone is governed should "respect completely the independence of our institution".

That comment was in response to Sarkozy's aggressive stance toward the European Central Bank during the election campaign.

Monetary union has been an "immense success" in supporting growth through a credible monetary policy guaranteeing price stability in the medium term," Trichet said.

He noted that eurozone growth stood at 2.8 percent last year, its strongest rate since 2000.

Nevertheless "insufficient structural reforms in Europe is, in my opinion, the reason for the difference in the potential for growth compared with the United States and other advanced economies," he added.

"There is now a unique chance for European governments to use this favourable growth to push forward structural reforms," said Trichet.


Copyright AFP

SUbject: French news

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