On Monday ECB president Jean-Claude Trichet added to the pressure laid on Member State governments by MEPs when he called for a "quantum leap" on economic governance while addressing the EP's economics committee.
Towing a very similar line to that developed in an EP resolution on economic governance adopted by a large majority last week, Mr. Trichet said that policy-makers needed to follow up their words with deeds and advocated for a strong surveillance of economic policies, "quasi-automatic" sanctions for under-performing countries, and much more binding power to Commission proposals regarding budget corrections. During his regular meeting with the committee's MEPs, Mr Trichet also gave his usual assessment of the economic situation in the EU and explained the ECB's May decision to buy Eurozone bonds.
The new economic governance architecture
MEPs were quick to pick up on the ECB's vision of economic governance as outlined in its paper published earlier this month. Sylvie Goulard (ALDE, FR) questioned the idea of creating an independent fiscal agency which would take care of vetting Member States' budgets, arguing that such an agency would undermine the Commission's powers. Mr. Trichet replied that independence would give the body the strength it needed, but also pointed out that the ECB's suggestion was to place this body within the Commission.
"Is fiscal federalism and economic governance the same thing?" asked Astrid Lulling (EPP, LU), picking up on Mr. Trichet's earlier intervention. Mr. Trichet replied that at the moment, arguing for the equivalent of fiscal federalism based on much stronger surveillance of budgetary and competitiveness policies was possible and pragmatic, since a truly federal system would require a treaty change.
Markus Ferber (EPP, DE) suggested that ECB itself should assess Member States' policies, considering that the Commission may also be too linked to the governments. "The ECB is already part of the assessment process. We are always available if needed." Mr. Trichet replied. Other MEPs also suggested that the ECB should enter the economic governance arena more, with Nikolaos Chountis (GUE/NGL, EL) saying that part of the "quantum leap" should include a change in the role and functions of the ECB. Mr. Trichet regularly rebutted that the ECB's mandate is price stability.
Out of the debt and into recovery
Attention was also given to the purchaseof Eurozone bonds by the ECB to prevent financial instability in the EU, stemming from rapid increases in the risk premiums of sovereign debt in certain countries of the Union. Mr. Trichet explained that the exceptional circumstances had led the ECB to take this action so as to ensure that the real economy would not suffer from problems in government bond markets.
Ivo Strejcek (ECR, CZ) asked for information about the bond purchasing programme arguing that the lack of transparency was incorrect. Giving some figures of purchases over the last weeks, Mr. Trichet specified that it was the finer details that had not been published.
Zoran Thaler (S&D, SK) remarked that people were unhappy about the recent actions with regards to Greece. He asked about the plausibility of the option of Greece leaving the Eurozone temporarily.. "This is not my working assumption" Mr. Trichet replied. On the blame game surrounding the Greek debt crisis Godfrey Bloom (EFD, UK) suggested that it was always easy to blame others.
Turning to the economic recovery more generally, Philippe Lamberts (Greens/EFA) challenged Mr. Trichet about austerity being conducive to recovery. "Austerity programmes undermine our ability to do our best", he said. Mr. Trichet replied that the recovery had to go hand in hand with budgetary prudence in order to regain the people's confidence, without which a true recovery would not be possible.
Governance debate continues
The members of the economic and monetary affairs committee will continue their work on economic governance on Tuesday morning when discussions begin on a report which will call on the Commission to propose legislation on governance and will detail how the European Parliament is to be included further in the process.