AIX-EN-PROVENCE, France—The global economy is still fragile and more work needs to be done in terms of strengthening economic governance in the European Union and coordinating policies among its 17 members to avoid future crises, European Central Bank President Jean-Claude Trichet said Sunday.
"The major revelation of the last four years was the fragility of the global economy," Mr. Trichet told the Rencontres Economiques d'Aix-en-Provence conference. "Strengthening resilience is absolutely essential given the fragility exhibited by the global economy."
Mr. Trichet's remarks come as the European economic bloc faces increasing challenges, with some observers warning that it ultimately runs the risk of disintegrating unless it founds a way to coordinate and reduce discrepancies between the economic cycles of its members.
The escalation of the sovereign debt crisis in some EU countries has shown a clear divide between a European economic core, centered on Germany, and a periphery that includes highly indebted countries such as Greece and Portugal.
Mr. Trichet, whose term as ECB president ends in October, called for a "serious advance in the way we regulate systemic institutions, including nonbanking institutions."
"We have a lot of work to do on nonbanking institutions in terms of reinforcing the noncyclicality of regulations governing these institutions," he said.
Mr. Trichet's comments echo those of Bank for International Settlements General Manager Jaime Caruana on the so-called shadow-banking sector, which includes insurers, hedge funds, and money-market funds and could be subject to growing regulation in the wake of the crisis. Mr. Caruana said Thursday there is a need to "monitor and where appropriate address the risks represented by the shadow banking sector," which can "create opportunities for arbitrage that might undermine future banking regulation."
Mr. Trichet also reiterated calls for stronger coordination of public spending in the 17-nation currency union and the EU as a whole. The approval of the EU's key economic-governance proposal, which is central to strengthening oversight, is stalling due to disagreement between the Parliament and the European Council.
"We evidently need a strengthening of governance for the constellation of sovereign states that we have seen working together so effectively in terms of creating wealth," he said, adding that this could even go as far as a single euro zone finance minister in the future.
"I've said we have a lot of work to do now, but it's not forbidden, to think about medium and long term," Mr. Trichet told the audience in this southern French town. "So after tomorrow can imagine a flexible confederation that would be very different from the U.S., but in which we would have a federal minister in the economic domain."
"As a citizen I want this, but it's not for tomorrow, it's for after tomorrow," he said.
However, Mr. Trichet's calls for a unified, continent-wide economic policy to match the ECB-managed monetary policy have met with opposition from some EU governments.
Swedish Finance Minister Anders Borg on Sunday dismissed the idea of an EU finance minister, or an official that would embody a homogeneous economic policy within the union, because that would imply increasing transfers among member countries.
Mr. Borg said he would rather see the implementation of stricter governance mechanisms to prevent the national public accounts of some member states to deteriorate.
"I'm skeptical about a transfer union," Mr. Borg said on the sidelines of a panel at the Aix-en-Provence conference. "We don't need an EU government, but rather a EU governance system that prevents public spending from spiralling out of control in the future."
Mr. Borg noted that it would be politically too hard to ask voters from rich countries to subsidize high spending in poorer union members.
Source: http://online.wsj.com
No comments:
Post a Comment