ECB chief Trichet urges Germany to lead EU fiscal reform

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European Central Bank president Jean-Claude Trichet urged Germany Thursday to lead a European drive towards greater economic stability in the midst of the Greek financial crisis.

"I count particularly on Germany" to push for stronger peer surveillance as envisaged in the European Union's Growth and Stability Pact, Dow Jones Newswires quoted Trichet as telling the ninth Munich Economic summit.

That would help provide Europe with "a strong sense of direction" as it strives to recover from a historic economic recession and a crisis sparked by the threat of a Greek default on its sovereign debt.

Germany has been strongly criticized for dragging its feet with respect to a joint rescue package for Greece being drawn up by the EU and the International Monetary Fund.

As the biggest eurozone member, Germany would likely make the biggest single contribution to a bail-out, currently estimated at roughly 25 billion euros (33 billion dollars) of a total 120 billion over three years.

Berlin is close to approving the bail-out but has insisted Greece implement an "ambitious" austerity programme in exchange for the help.

Germans are willing to make sacrifices to get their own finances in order but resent having to also cover the cost of what they consider profligate financial policies by Greek officials.

Trichet nonetheless called for "a courageous, comprehensive and convincing multi-year programme" to help Greece, which is struggling with debt of around 300 billion euros and a public deficit equal to 13.6 percent of gross domestic product.

He added however that the eurozone needed to make a "leap forward in policy surveillance and policy adjustment," after most of its 16 members ran up huge deficits trying to battle the economic slowdown.

Market concern over the Greek situation has thus now also spread to countries like Italy, Portugal and Spain.

The widely discredited Stability and Growth Pact was supposed to limit deficits of no more than three percent of GDP and debt of no more than 60 percent.

"We need to resolutely improve the effectiveness of the peers' surveillance of fiscal and economic policies," Trichet stressed.

© 2010 AFP

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