ECB official calls for euro zone integration

 

EUROPEAN CENTRAL Bank official Jörg Asmussen has called for euro zone members to move forward with deeper fiscal and political integration.

Ahead of tomorrow’s Brussels summit, with growing pressure on Berlin, German economic hawks at the ECB – past and present – have insisted that chancellor Angela Merkel maintain her tough line on Greece.

Leading the way, Mr Asmussen, a member of the ECB governing council, said growth measures – agreed without reopening the fiscal treaty – could help drive European integration.

“The benefits of a currency union are so outstanding that they should be stabilised by deepening, which means a fiscal union and banking union as well as a democratic legitimised political union,” said Mr Asmussen yesterday in a speech in Berlin, sketching out his vision for the EU in 10 years’ time.

Picking up from where his boss, ECB president Mario Draghi, left off earlier this month, the German-born economist listed growth measures that would not require extra spending, from labour market reform to labour force mobility. The “critical mass” of measures was more important than their legal form, he said.

Mr Asmussen called for a Europe-wide financial regulator and finance watchdog, as well as an EU budget “special fund” for the euro zone, financed by the earnings of a tax on financial transactions.

After years of government-led crisis measures, efforts to promote greater democratic legitimacy were overdue in the EU. His proposal: to give the European Parliament the right to initiate legislation.

Finally, he called for euro zone members of the parliament’s economics and finance committee to meet regularly – a suggestion bound to raise hackles among non-euro members.

Meanwhile, his predecessor at the ECB, Jürgen Stark, has said countries bailed out by the EU and International Monetary Fund should have been asked to leave the euro zone before being assisted.

“If a country mismanaged itself and has to perform a correction . . then outside the euro area,” he said. “The currency union has already taken a hit. A severe cut at the start of the crisis would have been better.” Mr Stark said it was a “mistake” to allow the IMF help countries inside the EU. The EFSF bailout mechanism also sent a wrong signal, he said.

“With that we buried the Maastricht Treaty, the legal basis for currency union,” he said.

A third German voice, Bundesbank president Jens Weidmann, said euro zone banks should not increase their exposure to Greece ahead of next month’s election.

Pending the Greek vote, Mr Weidmann said central banks “must ensure that the risk on our balance sheets remains manageable”. “I would not consider it to be right for the euro system to further increase its level of risk for Greece,” he said.

Analysts say Greece’s European partners could face losses of up to €200 billion if Athens abandoned the euro.

Mr Asmussen confirmed yesterday that four Greek banks no longer had access to ECB liquidity, because of insufficient capitalisation, and are receiving emergency liquidity from the Greek central bank.