Brussels, 16/03/2011 (Agence Europe) - On Wednesday 16 March, the MEPs of the Parliamentary committee on economic and monetary affairs held a hearing of the Belgian Peter Praet, who has been selected by the Ecofin Council to replace the Austrian Gertrude Tumpel-Gugerell on the board of the European Central Bank. In line with the position of the Frankfurt-based bank, he recommended a “qualitative leap” for the EU as regards economic governance and for an appropriate timetable to be developed to remove the extraordinary measures applied by the ECB since the debt crisis.
“The economic leg of the economic and monetary union is too weak”, Praet said. In his view, the member states must “urgently” consolidate their public finances and continue their structural reforms. On Tuesday, the president of the ECB, Jean-Claude Trichet, said that the political agreement of the Council on the economic governance legislative package does not go far enough towards greater budgetary rigour (see other article and EUROPE 10337).
ESM. The creation, in mid-2013, of the European Stability Mechanism will allow the ECB to “re-centre itself” on monetary policy and price stability. The Frankfurt bank will then be in a position to phase out the non-conventional measures set in place since 2010, such as purchasing the sovereign debt of struggling Eurozone countries. The ESM should therefore be given a “vast range” of competencies, said the leader of the Belgian national bank. The Eurozone summit decided that, under certain conditions, the ESM will be able to buy sovereign debt directly from the issuing country (primary market), but not from financial actors which already hold them (secondary market) (EUROPE 10335).
Lastly, Praet called for “greater transparency” on the markets for insurance cover against the risk of an issue of sovereign debt defaulting (sovereign CDS). However, he is “unconvinced” that there is a need to ban this kind of derivative product. (M.B./transl.fl)