Brussels, le 18/07/2012 (Agence Europe) - On Tuesday 17 July 2012, Jörg Asmussen, a member of the European Central Bank (ECB)'s executive board said at a conference at the European Policy Centre that Economic and Monetary Union needed a body with the power to restrict the amount of bonds countries can issue. He added that Spain didn't need a fully-fledged aid programme because “Spain has not lost access to markets for sovereign debt”. He welcomed the package suggested by Spanish Prime Minister Mariano Rajoy last week (€65 billion in spending cuts) as proof of “the will to stick to the agreed fiscal target”.
Commenting on the decision by the eurozone finance ministers to give Spain an extra year to achieve its target of bringing its deficit back below the 3% cut-off point, he said it was a “realistic goal that must be achieved” although a little later, he said: “Lack of peer pressure among decision-makers has real costs” and “it seems the lesson still has not been learnt completely: deadlines for the correction of excessive deficits are being relaxed”. Implementation of the European Commission's recommendations should be done “not to comply with Brussels but for the good of their own countries”.
Asmussen said it was too soon to talk about closing down Spanish banks: “This is just the starting point of the exercise to really make sure where we stand, what are the recapitalisation needs”.
Asmussen talked about the Irish programme, which has just passed the seventh fact-finding assessment (see EUROPE 10655). He ruled out the likelihood of the meeting between the Irish finance minister, Michael Noonan, and the president of the ECB, Mario Draghi, that was taking place in Frankfurt leading to any decision (see related article), saying that Ireland would be able to come through with the existing programme. Noonan has made it clear that he wants to renegotiate the terms of the Irish aid programme with the country's lenders.
The future of Economic and Monetary Union. Asmussen said the future of the EMU depends on three things - an integrated financial market, Economic and Budgetary Union and greater democratic legitimacy. He said the most important question was where people wanted to be in ten years time, arguing that if members of the eurozone could not answer this question, then nobody would buy their ten-year bonds. He intended this as a way of telling the markets the euro is here to stay, but he said that experience had shown that monetary union is “incomplete”.
In order to complete Monetary Union, Asmussen said countries would have to agree to share some of their sovereignty in the future. The first step here is about a single European bank supervision authority. He said that just after the summer break, the Commission will be unveiling proposals and the ECB Governing Council has also started examining the matter. It was important for the system to allow the ECB to act effectively, independently and without danger to its reputation. The supervisory role would have to be totally “separate” from monetary policy decisions. Asmussen said the ECB had not yet decided what kinds of banks would be covered, but the best thing would be to remain “focussed on the euro area”. He said that eurozone was “not closed” but “open to new members” and “we shouldn't fear a two-speed Europe; it's already a reality”.
Asmussen called for the eurozone to be given the power to correct and prevent unviable economic policies in eurozone nations. This would require the setting up of an “authority (that) would have competence to limit countries' ability to issue debt” and “have intervention rights into national budgets and to compel member states to correct their policies, be that in the fiscal, structural and financial fields”.
Any move to strengthen integration in the eurozone, however, would have to be accompanied by extra democratic legitimacy.
Asmussen said that he was taking the long view: “We don't have to wait, some can be done without changing Treaties” although, for a union of financial markets, “a sound legal basis” will be needed.
He ended by saying that “the steps we're about to take are significant but we have to take them”. (EL/transl.fl)