Jean Claude Trichet, the President of the European Central Bank, yesterday told MEPs on the economic and financial affairs committee that they should take the plunge and introduce amendments to the economic governance package proposed by the European Commission.
According to the ECB chief, the Commission’s proposals are not strong enough and can be easily thwarted by member states.
In its proposals, presented a few weeks ago, the Commission suggested more EU surveillance on national budgets and the possibility of introducing automatic sanctions against defaulters, particularly those member states which continuously surpass the deficit and debt thresholds.
However, according to Mr Trichet, the Commission’s proposals do not go far enough.
Speaking in Brussels yesterday, Mr Trichet appealed to MEPs to be ambitious in reforming the Commission’s proposals on economic governance which, “although going in the right direction lack some boldness and detail”.
In a veiled criticism of recent events, Mr Trichet repeatedly took the opportunity to call for “verbal discipline and clarity” which was essential in such times.
“As co-legislators on this package I have no doubt that you will be up to the challenge of making the economic governance model better,” Mr Trichet told MEPs.
Mr Trichet spelt out his concerns regarding the Commission’s proposals saying that the preventive arm of the stability and growth pact lacked detail, that the planned sanctions could be evaded too easily by invoking exceptional circum-stances, and that more work needed to be done to define in advance what constituted a macro-economic imbalance.
With regards to the current state of the euro, Mr Trichet said that there is no threat to the EU’s currency and the rife speculation on the money markets shows that certain players are misunderstand-ing the intentions of member states to keep boosting the European currency.
He said that both Ireland and Greece are solvent despite the aid granted by the EU recently and said that Portugal does not seem to be heading towards the need of EU aid.
Mr Trichet said that he was optimistic about the future of the European economy and that “pundits are tending to underestimate the determination of governments, the and the 27 member states of the EU”.
Recent data releases confirmed the view of the European Central Bank that there is a positive underlying momentum in the eurozone economy’s performance.
The ECB’s chief said that inflation rates in the euro area, which are currently around 1.9 per cent, should “hover around that level for the next few months before moderating in the course of next year”.
He described inflationary pressures over the medium term as “contained” and that, “in the absence of inflationary and deflationary pressures, inflation expectations over the medium to longer term continue to be firmly anchored in line with the governing council’s aim of keeping inflation rates below two per cent.”