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ECB head calls for urgent action in eurozone

business Updated: Sep 05, 2011 20:27 IST

AFP
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The head of the European Central Bank on Monday called for the immediate application of the latest debt rescue measures for Greece and a new way to govern the eurozone as pressure mounted on an ever-worsening European debt crisis.


In a speech, Jean-Claude Trichet implored eurozone nations to tighten up the monitoring of economies, imagining a "confederal" management of eurozone finances.


Speaking later, Mario Draghi, Trichet's successor at the ECB in two months time, asked for broad changes to the Lisbon Treaty and said short-term measures taken to stave off the debt crisis were clearly insufficient.

"Let's not forget that this crisis started from the incomplete European construction," Draghi said.

Both men were speaking in Paris at a conference organised by the Institut Montaigne, a French think tank.

In his talk, Trichet imagined a "confederal government with a confederal finance minister who would be able to underwrite overall governance at the heart of the eurozone and impose decisions."

The ECB head said that there was "no longer a shadow of ambiguity" about the fact that the crisis had "clearly revealed that governance within the eurozone was absolutely essential."

The crisis was resulting in the emergence of "a consensus for an extremely substantial strengthening of the Stability and Growth Pact."

Trichet said that EU and national legislatures enacting much tighter monitoring of national budgets, and which were due to be adopted within "a few days", were "clearly absolutely imperative."

He said, “In coming days we shall have a new pillar of surveillance of macro-economic policies, of indicators of competitiveness and of imbalances within the eurozone."

He also said it was urgent to apply the EU decisions taken on July 21 to provide Greece with a second debt rescue.

"There also we have an immediate and imperative need for all of the decisions to be enacted," he told the Institut Montaigne.

Draghi, who is currently head of the Italian central bank, agreed that the short-term answer was applying the agreements of the July 21, and giving enough resources to the expanded rescue fund as agreed at the time.

But "to cope with this, we must have a treaty change" that should "imply changes in governance" Draghi said.

"Overall, the aim of this effort should be a quantum step up in European economic and political integration," he said.

Trichet and Draghi spoke against a background of sharply renewed concern about the state of Greek finances and the wider eurozone debt crisis.

On Friday an audit mission from the EU, ECB and International Monetary Fund cut short its latest study of Greek finances, on which depends the next release of money from the first rescue, saying that Greece had more work to do on its crash programme to reduce the public deficit.

European stock markets plunged on Monday, with Paris, Frankfurt and Milan losing more than 5%.