European Central Bank President Jean- Claude Trichet said governments should consider setting up a finance ministry for the 17-nation euro region as the bloc struggles to contain a region-wide sovereign debt crisis.
"Would it be too bold, in the economic field, with a single market, a single currency and a single central bank, to envisage a ministry of finance of the union?" Trichet said in a speech today in Aachen, Germany.
He also favors giving the European Union powers to veto the budget measures of countries that go "harmfully astray," though that would require a change to EU Treaties.
Trichet, one of the architects of the Maastricht Treaty that founded the euro, is setting out his vision for how the currency can be better managed just months before he retires and as European officials rush to put together a second bailout plan for Greece. Last year’s 110 billion-euro ($159-billion U.S.) rescue failed to prevent an investor exodus from Greece, which has been saddled with Europe’s highest debt load amid a three-year economic slump.
Ireland and Portugal also had to ask for European aid as borrowing costs soared on concern the countries wouldn’t be able to tame their budget deficits.
German government bonds fell after the remarks before regaining ground. The 10-year yield was little changed at 2.99% as of 12:44 p.m. in London. Greek two-year notes erased a decline to leave the yield little changed at 24.54%. The euro rose more than a quarter cent to as high as $1.4486 U.S.
Trichet, who has no formal power over government decision making, hasn’t said what he plans to do when he leaves the ECB at the end of October. He said today that while any single finance ministry would "not necessarily" administer "a large federal budget," it would "exert direct responsibilities in at least three domains."
These would include "first, the surveillance of both fiscal policies and competitiveness policies" and "direct responsibilities" for countries in fiscal distress, he said.
It would also carry out "all the typical responsibilities of the executive branches as regards the union’s integrated financial sector, so as to accompany the full integration of financial services, and third, the representation of the union confederation in international financial institutions."
Trichet said that any new form of fiscal governance would need to be "decided by the people of Europe" and that the EU president, the European Commission and the German finance ministry are sure to have their own views. Calls to the German finance ministry for comments on Trichet’s proposals were not immediately returned. Officials at the French finance ministry declined to comment.
The absence of a European Treasury has drawn criticism in the past, including from billionaire investor George Soros who said as far back as 2009, before the sovereign-debt crisis erupted, that the lack of a common European fiscal authority is among the "issues that need to be confronted."
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