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ECB warns on currency, calls for euro sanctions
AFP - 2 hours 42 minutes ago
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ROME (AFP) - – European Central bank chief Jean-Claude Trichet warned against excessive currency volatility and called for stricter rules on European debt, in an interview with Italy's La Stampa daily published Sunday.
Trichet also hit back against German central bank chief Axel Weber, who has proposed scrapping a government bond buying programme set up earlier this year as part of European efforts to restore confidence during Greece's debt crisis.
And he praised the work done by Mario Draghi, who is both the head of Italy's central bank and the chairman of the Financial Stability Board, a body set up in 2009 to coordinate international efforts for financial regulation.
Both Weber and Draghi are seen as leading candidates to replace Trichet once his mandate runs out as head of the ECB in November next year.
Trichet also stressed the importance of structural reforms and debt reduction in Europe to improve the prospects for growth and create jobs.
Asked about a possible dollar devaluation, Trichet commented that excess volatility and disorderly movements in exchange rates always have adverse implications for economic and financial stability.
"And I consider it very important that the US authorities also recently confirmed their long-standing position that a strong dollar vis-a-vis the other major floating currencies is in the interests of the United States," he said, according to an English transcript of the interview on the ECB website.
Trichet also stressed the importance of debt reduction in the 16 eurozone countries in the wake of the economic crisis and called for stricter sanctions against countries that break eurozone rules on their deficit and debt levels.
"For us, the proposals of the European Commission move in the right direction. But more ambitious reforms are needed," he said.
"With the benefit of hindsight we know now that it is very important to engage in quasi-automatic sanctions and with an accelerated procedure.
"Sanctions must be possible in the early stages of macroeconomic surveillance," he added.
When asked about Weber's comments that the ECB bond-buying programme should be scrapped, Trichet reacted vehemently.
"No! This is not the position of the governing council, with an overwhelming majority. This non-standard measure... was designed to help restore a more normal functioning of our monetary policy transmission mechanism," he said.
Trichet also credited the Bank of Italy for the fact that the country's financial system had proved more resilient than others in the eurozone.
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