Europe’s Big Three say no change in ECB role
Eurozone giants Germany and France vowed to propose changes to EU governing treaties on Thursday, but Chancellor Angela Merkel stood by her refusal to widen the European Central Bank’s role.business Updated: Nov 24, 2011 22:30 IST
France: Eurozone giants Germany and France vowed to propose changes to EU governing treaties on Thursday, but Chancellor Angela Merkel stood by her refusal to widen the European Central Bank’s role.
France had urged Berlin to allow the ECB to become a lender of last resort, with the firepower to protect debt-ridden euro zone members from falling victim to the bond markets, but the German leader stood firm at crisis talks.
President Nicolas Sarkozy of France and Prime Minister Mario Monti of Italy stood by her side at a news conference in Strasbourg as she repeated her line, which observers and traders have warned could threaten euro zone survival.
“The French President has just underlined that the European Central Bank is independent,” Merkel told reporters in the eastern French city. “So the eventual modifications to the treaties will not concern the duties of the ECB, which concern monetary policy and monetary stability.”
Sarkozy agreed that: “All three of us said that with respect for the independence of this institution, one should refrain from positive or negative demands of the ECB.”
Earlier, Sarkozy’s senior ministers had made it clear that Paris was pushing for a change in the ECB’s role, which Berlin insisted must remain limited to controlling inflation and not bailing-out insolvent states.
France’s minister for European affairs, Jean Leonetti, explained: “France eventually wants the European Central Bank to have the same role as the Federal Reserve in the United States. What’s going on is very abnormal.
“Why is the euro under attack? It is simple. In the United States there is a Federal Reserve. Europe has the European Central Bank, but the European Central Bank does not buy up sovereign debt if needed,” he argued.
Germany on the other hand is calling for changes to European treaties to enforce greater budget discipline on its heavily indebted partners.
Fitch cuts Protugal’s rating
InternationalL ratings agency Fitch has downgraded Portugal’s debt to junk status due to its high debts and poor economic prospects.
Fitch said on Thursday it is downgrading Portugal one notch, to BB+ from BBB-.
The agency said it took the measure because of Portugal’s “large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook.”
The move is another blow to Portugal’s efforts to restore its fiscal health after taking a €78 billion ($104 billion) bailout earlier this year to avoid bankruptcy.
The government is cutting spending and hiking taxes’ measures which triggered a general strike on Thursday. AP