Trichet calls for tougher budget scrutiny

Wednesday 13 October 2010 19.52
Jean-Claude Trichet - Speech on reforming economic governance
Jean-Claude Trichet - Speech on reforming economic governance

The President of the European Central Bank has called for much tougher and intrusive levels of scrutiny of the budget policies of countries in the eurozone, especially those with debt problems.

In a speech on reforming economic governance, Jean-Claude Trichet called for the creation of an early warning system to identify unsustainable economic policies in eurozone countries.

Speaking in New York, Mr Trichet said the economic crisis highlighted the need for broader surveillance of macroeconomic policies.

He also called on member states to go far beyond the current European Commission proposals for reform of the rules of the single currency.

He said a new, more intrusive system of surveillance should concentrate on countries with vulnerabilities, losses in competitiveness and high debt levels, as these countries face the greatest sustainability challenges.

Mr Trichet said that where early warning indicators show potential problems they should automatically trigger in depth investigations, including visits from Commission and ECB staff.

The process should be backed up by what he called graduated sanctions, which kick in at an early stage to reinforce compliance with recommendations.

He also called for the Commission economics directorate to be beefed up, with more and better staff and resources, backed up by an independent external assessment body.