Europe needs 'quantum leap' in budget checks: ECB chief

9th September 2010, Comments 0 comments

European Central Bank chief Jean-Claude Trichet called for a "quantum leap" in budget checks on eurozone nations in the wake of the Greek debt crisis, in an interview released Thursday.

Trichet told the Financial Times the suspension of the voting rights of member states who breach the conditions "is something that should be explored" but that he did not back expelling them.

"We call for a quantum leap' in the reinforcement of fiscal surveillance with, in particular, what I would call the reversal of the burden of the proof," he told the FT when asked about the lessons of the Greek crisis.

"We have called for the quasi-automaticity' of procedures and sanctions. We have called for a reinforced independent way of assessing the fiscal situation and we have also called for a quantum leap as regard the surveillance of competitiveness and imbalances in euro area member countries."

Trichet warned that governments and financial institutions had to be permanently in a state of "credible alertness" for further shocks amid fears that the economic recovery is running out of steam.

"We are in a situation where central banks in particular, and also other authorities, have to remain alert and have to know that we are in an uncertain universe," Trichet said.

But he said Europe was not at risk of deflation.

"No, I do not see the materialisation of a risk of deflation, or either of inflation, at present. We went through the heat of the crisis without any materialisation of deflationary risks," he said.

© 2010 AFP

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