Trichet seeks single EU finance ministry

Jean-Claude Trichet, president of the European Central Bank, has called on the European Union to take bolder steps towards controlling fiscal and economic policies, suggesting a long-term goal of establishing a European ministry of finance.

In a speech outlining his vision for the future of European economic and monetary union after the eurozone crisis, he called for medium-term measures that would allow EU members to veto national economic policy decisions if they endangered eurozone stability.

“There is no crisis of the euro,” Mr Trichet declared in his capacity as chief guardian of the stability of the common European currency. While he avoided any detailed reference to negotiations for a new rescue package for Greece, he called for a drastic change in the system of economic governance in the eurozone, going beyond “the dialectics of surveillance, recommendations and sanctions”.

He said “strengthening rules to prevent unsound policies” was an “urgent priority”. The ECB had already called for a “quantum leap” in economic governance, and urged the European Parliament to reinforce the draft secondary legislation that is under negotiation with the Commission and the Council.

Speaking in Aachen, Germany, Mr Trichet called for a European Union that would be “a confederation of sovereign states of an entirely new type”.

“In this union of tomorrow, or of the day after tomorrow, 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 said.

Such a ministry would not necessarily have a large budget. But it would exert surveillance of “both fiscal policies and competitiveness policies”, and have a veto right over specific spending decisions. It would also enforce regulation of the union’s “integrated financial sector”.

Mr Trichet admitted a common ministry of finance would require “a very important change of the [EU] treaty, and will have consequences in all the union’s responsibilities”.

His ideas, if implemented, would represent a huge step towards integration of national budgetary policies – thinking that goes well beyond the consensus in most states, including Germany, France and the UK.

However, he singled out potential allies as having “their own views on this question”. They included Wolfgang Schäuble, German finance minister, José Manuel Barroso, president of the European Commission, and Jean-Claude Juncker,Luxembourgprime minister and chairman of the Eurogroup that co-ordinates eurozone policies.

In the medium term, he foresaw a two-stage process to help countries in difficulty, and prevent “crises spreading in a way that could harm other countries”. The first step would provide financial assistance “in the context of a strong adjustment programme”, as the eurozone members are doing for Greece, Ireland and Portugal.

The second step would be for “the European authorities . . . to take decisions themselves applicable in the economy concerned”.