Trichet calls for 'urgent' eurozone reform
European Central Bank President Jean-Claude Trichet called Monday for "urgent" reform to allow faster and more effective sanctions for rule-breaking EU states in the wake of the eurozone debt crisis.
Trichet, speaking at a London conference, argued that the crisis -- which has sparked the EU/IMF bailouts of debt-laden euro members Greece, Ireland and Portugal -- raised questions about regulation of the eurozone region.
"The sovereign debt crises in three smaller euro area countries underline the urgency of a far-reaching overhaul of the fiscal and macroeconomic surveilance institutions in Europe," he told students at the London School of Economics.
He added: "The crisis has exposed weaknesses in the economic governance framework of EMU that needs to be addressed urgently."
The ECB president also argued that the current framework had not done its job in the context of the current crisis.
"The existing economic governance framework (for the eurozone) has been incorrectly implemented and, more importantly, has proved to be insufficiently binding while lacking appropriate comprehensiveness."
Trichet called for speedier and more automatic penalties for eurozone member states who run excessive budgets.
"The ECB takes the strong view that there is the need for more speed and automaticity in the sanctioning mechanism, particularly in the stability and growth pact, but also in the broader macroeconomic policy surveillance framework," he told the LSE.
"The experience of the past months has vividly demonstrated the importance of a timely correction of internal and external imbalances."
The sanctions also needed to be more effective to force member states to adhere to the rules, he continued.
"Beyond faster and more automatic sanctions, the enforcement tools also need to be more effective.
"The macroeconomic surveillance framework, in particular, need to provide clear incentives by imposing financial sanctions at an early stage. This also means that there should be no room for discretion."
Trichet spoke one week after the ECB held its main interest rate on hold at 1.25 percent -- but it also signalled an interest rate hike in July to fight soaring inflation.
© 2011 AFP