Brussels, 01/12/2011 (Agence Europe) - The new president of the European Central Bank, Mario Draghi, called on the eurozone countries in a monetary policy discussion at the European Parliament on Thursday 1 December to move towards a genuine budget union, being vague about the possibility of further action to solve the sovereign debt crisis. “What I believe our economic and monetary union needs is a new fiscal compact... a fiscal compact would enshrine the essence of fiscal rules and the government commitments taken so far, and ensure that the latter become fully credible, individually and collectively. Enough? Our answer is that it is definitely the most important element to start restoring credibility. A new fiscal compact would be the most important signal from euro area governments for embarking on a path of comprehensive deepening of economic integration. It would also present a clear trajectory for the future evolution of the euro area, thus framing expectations.” On the legal process underlying the drawing up of such a pact, Draghi said various options should be considered, including a substantial change to the EU treaty, but faster methods could also be feasible.
Once the pact is up and running, “other elements might follow, but the sequencing matters.” This sentence can be interpreted as meaning that the ECB may consider the option, once there is firm political commitment for a budget union, of taking much more substantial action than at present to prevent any further spread of the debt crisis despite the fact that its primary mission is to contain inflation. Since May 2010, the ECB has bought nearly €200 billion-worth of bonds of struggling eurozone nations, but Draghi said that could not continue indefinitely and was aimed solely at ensuring proper transmission of monetary policy rather than financing governments. The ECB accepts the bonds of struggling countries as collateral for unlimited loans granted to the countries' banks over the short-term. In conjunction with the central banks of a number of non-EU countries, the ECB bought up more bonds on Wednesday to help European banks get access to US dollars. The ECB is under enormous pressure from European leaders to act as the lender of last resort by buying up huge amounts of bonds from countries like Italy and Spain. In order to respect the ECB's independence and not display their disagreements over this issue in public, France and Germany have agreed not to comment on the lender-of-last-resort question.
Resolution. The MEPs voted through resolutions under the aegis of Ramon Tremosa i Balcells (ALDE, Spain). During the debate, the rapporteur said that the ECB must continue to buy up bonds on the money markets to save the euro. He regretted the European Commission and member states' wavering. The resolution sets out a number of ideas on how the eurozone's government can be restructured, calling for the creation of an EU finance ministry, democratically accountable to the EP, and also, in the medium-term, for a single European Treasury that would issue eurobonds. The MEPs said they would soon be looking at the idea of suspending the credit rating of countries in receipt of international financial aid. (MB/transl.fl)