Trichet calls for euro finance ministry

OUTGOING European Central Bank president Jean-Claude Trichet has proposed the establishment of a finance ministry for the 17 euro states as a means of preventing another debt crisis.

Already financial meltdown has forced Ireland and Greece to seek costly bailout funding of €85 billion and €110bn respectively.

In the context of an evolving EU “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?” he asked.

According to the script of his speech delivered in Aachen, Germany, Trichet suggested, in what could be seen as a valedictory speech, that the current crisis and the failures of some member states suggest that the EU logically needs more power to intervene in the framing of budgets where the states in question have gone seriously off beam.

The EU could be given power to intervene in the budgets of countries if they go “harmfully astray,” he said.

He pointed out the expansion of the EU to 27 countries, and even more so the move to EMU, “introduces a new understanding in the way sovereignty is exerted.”

He acknowledged that in the aftermath of the global finance crisis we had to face up to the challenges of supporting countries that hit the rocks financially.

Europe has responded to that challenge but looking to the medium term and with an eye to the current crisis, Trichet asked if the authorities in the euro states should be given a “much deeper authoritative say in the country’s economy policies if these go harmfully astray.”

He questioned that, in the interest of protecting all that has been achieved by the EU, should those in charge not be given powers of direct intervention if after the first efforts to contain an individual crisis have not been successful.

When countries get into trouble it was of “paramount importance” that they be given time to sort out their difficulties.

After that if “a country is not delivering, I think all would agree that the second stage of helping a state with budgetary or financial issues calls for deeper intervention.” When that situation arises in the future, the ECB president said we have to consider “giving euro area authorities a much deeper and authoritative say in the formation of the country’s economic policies if these go harmfully astray.”

In that sense Trichet said that would involve “a direct influence,” well over and above what is currentlyenvisaged.

Looking back at the spirit of the ‘founding fathers’ Trichet said he envisaged a “confederation of sovereign states of a new type, with new institutions to manage the interdependence of to today and tomorrow.” Such an outcome would recall “the heroism of reason” that inspired those that envisaged a Europe that would be at peace with itself and economically successful.