Brussels, 30/11/2010 (Agence Europe) - The president of the European Central Bank, Jean-Claude Trichet, addressing MEPs on the European Parliament's economic and monetary affairs committee on Tuesday 30 November, said that the financial markets flagrantly underestimated the determination of eurozone member states to consolidate their public finances. He wryly commented that this was nothing new. In response to a question from Jean-Paul Gauzès (EPP, France), he said that financial stability in the eurozone was facing some problems but was not under serious threat.
According to the ECB president, there are several reasons for the money markets' underestimation of the budget consolidation efforts - all member states are carrying out budget adjustment programmes, aware that at macroeconomic level, the eurozone is doing better than its partners (in 2011, for example, the average public deficit in the eurozone was 4.6%, but it was 8.9% in the United States and Japan); the European economy is growing faster than expected now it recovered; and crisis management systems have been set in place to help Ireland (EFSF) and Greece (EFSM), and are working.
ESM. Trichet hailed the “useful clarification” by the Eurogroup of how private creditors would operate in the new European Financial Stability Mechanism (ESM) in line with the IMF's rules (see EUROPE 10266), saying that Europeans had the same amount of rules as exist at global level, relieved that the uncertainty that had lasted a month had now been cleared. In answer to Philippe Lamberts (Greens/EFA, Belgium) who criticised the ECB's reluctance to let the private sector be involved from the start in the cost of restructuring sovereign debt, Jean-Claude Trichet was very firm, stating that it would not help financial stability if long investors (holding bonds for long periods of time) were told that they must lose money and short investors, in other words the ones who are against you, were told that would make money.
Economic governance. The president of the ECB appealed to the EP to be ambitious in the negotiations over reform of economic governance in Europe. Calling for a virtual federation on the budget, he wanted faster penalties to be introduced for eurozone countries breaking macroeconomic surveillance rules, also calling for a stricter public debt reduction trajectory. Trichet cast doubt on the idea mooted by Sylvie Goulard (ALDE, France) of reintroducing questions relating to sovereign debt crisis management for debts in euros into the package of draft legislation on economic governance. He commented that it had proved so difficult to get clarification about the ESM, that the Pandora's box should be left well and truly shut. (M.B./transl.fl)