European Central Bank president Jean-Claude Trichet has urged euro zone states to accept vastly strengthened surveillance of their fiscal policies, slamming past failures as 'a disgrace'.
'The ECB believes that a true quantum leap is needed in the framework for surveillance and adjustment of fiscal policies,' Trichet told the European Parliament's committee on economic and monetary affairs in Brussels.
'It is of the essence that the surveillance of budgetary policies will be strengthened,' Trichet said.
The central bank president told European lawmakers that all had to accept that the spirit and letter of the EU's Stability and Growth Pact aimed at maintaining fiscal discipline had not been fully respected.
'We considered it was a disgrace, Trichet said.
He has in the past underscored that the two biggest euro zone countries, Germany and France, were among those that failed to meet limits on public deficits and debts without paying a price for the failure.
The euro zone faces a crisis of confidence because most of its members have failed to respect the pact's terms and financial markets have raised the cost of borrowing for many of them.
Punitive measures including sanctions should in the future be quasi automatic, the ECB president said, and 'sanctions need to be applied much earlier and to be broader in scope'.
Among the targets of heightened surveillance should be the competitive position of each country, including policies to raise productivity and improve people's skills, he said.
The public sector should not escape such scrutiny, meanwhile, 'since it too is decisive for the competitiveness of an economy as a whole,' Trichet added.
It should also be much harder to skirt around regulations, because that would require a specific and unanimous vote, Trichet said.
'A more stringent implementation of rules and procedures is essential,' Trichet said. 'The (European) Commission should have greater responsibility by making proposals which can only be modified with unanimity in the Council rather than mere recommendations under the Stability and Growth Pact.'
