Trichet urges tougher EU oversight of spending
FRANKFURT, Germany (AP) — The head of the European Central Bank says the EU should take tougher control over spending by national governments to strengthen the 17-country currency union against future crises caused by high debt.
Jean-Claude Trichet proposed allowing European Union officials to make spending decisions for financially troubled countries if — like Greece — they have already been bailed out and are failing to make progress on reducing their deficits.
"One way this could be imagined is for European authorities to have the right to veto some national economic policy decisions," Trichet said in a speech in Aachen, Germany.
"The remit could include in particular major fiscal spending items and elements essential for the country<s competitiveness."
He even suggested that the eurozone could in years to come have its own supra-national finance ministry.
Trichet's proposals looked to the longer-term, since they would require a time-consuming change in the EU's basic treaty. But his remarks were a timely reference to the situation in Greece.
Greece took a euro110 billion ($158 billion) bailout last year but has struggled to achieve its revenue and deficit targets. European Union and Greek officials are discussing the terms of a potential second bailout to keep the country from defaulting on its debts.
Trichet has said that the only way to protect the common currency from overspending by individual governments is to make a "quantum leap" by strengthening the rules against exceeding debt and deficit limits. An earlier set of rules proved to be ineffective, as governments ignored them.
The European Union is working on a proposed new set of rules, but Trichet says they're not strong enough and has urged the European Parliament to toughen them.