The European Central Bank yesterday decided to keep interest rates unchanged at one per cent, a decision that led the euro to gain 0.4 per cent against the dollar.
ECB chief Jean-Claude Trichet underlined the need for more rigid economic governance, particularly among the euro area member states to give more stability to the EU's currency.
"It is extremely important for the EU to make a quantum leap in its economic governance as a response to the eurozone debt crisis. This applies for Europe as a whole but particularly for the euro area," Mr Trichet said.
He said the ECB was drawing up recommendations on economic governance reforms that it would submit to member states. The proposals would include "much more effective monitoring" of national fiscal policies and "quasi-automaticity" to impose penalties on countries that "behave improperly".
He said the EU should use every possibility to reinforce governance that existed under its present legal framework. He said he "strongly supports" the principle that governments should submit details of their draft budgets for review at EU level, as part of a "European semester" of budget setting. He believes that "practically all" member states support this idea, "even those that were resisting".
Earlier this week, the President of the European Council, Herman Van Rompuy, said EU Finance Ministers agreed to new proposals by the Commission so all member states would have to send details of their budgets to Brussels before submitting them to their parliaments for approval.
The EU said it only wanted to check whether national budgets were in line with its overall economic and fiscal policies and would not be looking at "every single line of the budget".
Member states found to be breaching EU rules, including deficit and debt thresholds, would be asked to make changes before the actual budgets are approved by member states' parliaments.
Despite a preliminary agreement, the UK is still resisting the proposed rules. The issue will now be discussed again next week at a summit of EU leaders in Brussels.