German central banker moots eurozone insolvency plan

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German central bank governor Axel Weber, a member of the European Central Bank governing council, stressed on Wednesday the urgency of reforming eurozone institutions, including finding a way for member countries to declare insolvency.

Eurozone countries must not "miss a chance to use the limited time at their disposal now to reform" European Union economic and monetary institutions, Weber told German lawmakers according to a text distributed to media.

In addition to reinforcing the EU's Stability and Growth Pact which is supposed to prevent eurozone countries from running up excessive deficits and debt, "the introduction of a bankruptcy procedure for states has been proposed," Weber said.

"The realisation of this proposition wourld be an important contribution to ensuring the monetary union as a stable community," he added.

Weber, an unofficial candidate to replace Jean-Claude Trichet as ECB president in late 2011, also called for "a sanction mechanism in the event of a member country not applying necessary measures within the framework of a support programme."

Greece, in the midst of a financial crisis, had pledged to take draconian measures in exchange for a rescue package worth about 110 billion euros (134 billion dollars) in loans from eurozone partners and the International Monetary Fund.

© 2010 AFP

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