EUROZONE states which fail to adhere to fiscal rules could see their voting rights withdrawn, European Central Bank (ECB) president Jean-Claude Trichet told the European Parliament yesterday.
Speaking before the economic and monetary affairs committee, Trichet said that fiscal surveillance must be more direct and effective. He added: “In the event of non-compliance, sanctions need to be applied much earlier and to be broader in scope. A wider spectrum of financial sanctions needs to be considered, along with non-financial and procedural sanctions, such as more stringent reporting requirements or even a limitation or suspension of voting rights.”
He said that had the EU’s Stability and Growth Pact been rigorously applied in both letter and spirit, the Eurozone would be in a much better situation.
Trichet said that a quantum leap in terms of framework for surveillance was needed. This would not be limited to the 16 Eurozone member states. “I trust that we have to improve surveillance and coordination at the level of the 27 (EU countries). The single market is an entity which is very important to function correctly,” he explained.
“We need the equivalent of a fiscal federation. We need a set of rules which are very serious and stringent in monitoring budgetary policy.”
EU officials are currently in the process of creating new rules to prevent another sovereign debt crisis.
Trichet also reiterated his defence of the central bank’s decision to provide extra liquidity support to the markets and said that as with all non-standard programmes, it would only last for a certain time.