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September 28, 2020

European Central Bank calls for stricter rules to stabilise Europe

The outgoing president of the European Central Bank (ECB) called for changes to the EU treaty to rein in countries whose polices were threatening to imperil the entire bloc Sunday, as European leaders faced pressure to find a solution to the debt crisis this week, ABC News informs. Jean-Claude Trichet said in an interview on French radio the treaty should be changed to prevent member states straying from common norms, implying the need for a closer union under which decisions could be imposed on errant countries. The Continent’s top monetary policymaker, who will hand over the reins of the ECB to Italy’s Mario Draghi at the end of this month, added that the eurozone’s debt problems had come about because some members had not kept a sufficiently tight leash on their finances. “We don’t have a federal budget, we don’t have a political federation so we have to fully respect the constraints and the mutual supervision rules that exist in the eurozone,” Trichet said. “It is the case that in Europe we have a bigger problem than others and this is a problem of supervision and governance within the eurozone.”

In Sunday’s interview, Trichet said the ECB had taken exceptional measures in the past four years, notably in offering unlimited liquidity at fixed interest rates, adding that the central bank had not gone beyond its role set out in the Maastricht Treaty. The euro remained an “extremely credible” currency and the euro zone was “not under threat,” he said.

Meanwhile, the Nordic country of 5 million people, Finland, may decide to leave the single European currency and return to its markka if it is forced to cough up funds to support weaker euro zone members, Matthew Lynn, an analyst with Strategy Economics, wrote in a research note for CNBC. German Finance Minister Wolfgang Schaeuble said Sunday that the write-down of Greek debt through private sector involvement must be bigger than planned in the July 21 summit. In an interview with German ARD television, the minister said that a lasting solution for Greece would not be possible without the reduction of Greek debt.

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