Eurozone members that break the region's rules on public finances should be excluded temporarily from Europe’s political decision-making, the president of the European Central Bank has proposed.
The controversial suggestion by Jean-Claude Trichet, in an interview with the Financial Times, would be part of a “quantum leap” in the governance of Europe’s 11-year old monetary union, needed to prevent a future Greece-style economic crisis.
Mr Trichet’s comments highlight how he is trying to shape the debate on eurozone reform, which is expected to culminate in coming weeks when Herman Van Rompuy, the European Union’s president, reports on how to revamp the rules.
Greece’s spiralling public debts, which erupted into a full-blown crisis in May, called into question the long term future of the eurozone. The ECB has been in the forefront in lobbying for tougher rules – backed by sanctions – and the independent monitoring of public finances.
The Frankfurt-based institution has rejected the idea of a eurozone member ever being thrown out. But Mr Trichet said that the “temporary suspension of voting rights is something that should be explored”. His proposals could run into trouble, however with member states – especially as it is not clear that the withdrawal of voting rights would be possible without changing EU treaties.
Mr Trichet said the eurozone’s resilience had been underestimated. “I don’t think that the euro area was close to disaster at all – seen from the inside.”
He went on: “I know how Europe functions. I know how the constellation of authorities functions … Seen from the outside, I would say that it’s always difficult for external observers to judge and analyse correctly the capacity of Europe to face up to exceptional difficulties.”
The ECB president also suggested gloom about the US economic outlook might be overdone. “There is a mood which seems to me too negative. That’s my own personal feeling.”
The ECB president travels this weekend to Basel, Switzerland, were he will chair talks on new “Basel III” capital rules for banks. He refused to comment in detail ahead of the meeting, but warned banks that they could not in future expect the world’s taxpayers to put at stake such huge sums in rescue packages as in the past three years. “We cannot do that twice. The people in our democracies would not accept that.”
He also said that “we need the same rules at the global level” and described the rise in importance of the Group of 20 summits, which also include China and India, as “one of the major structural transformations of global governance over the last three years”.