Recent decisions by the European Union's executive arm not to
punish countries for violating fiscal rules, weaken their
credibility and raise doubt on whether the EU's rules can be a
basis for confidence, a member of the European Central Bank's
Executive Board said Friday.
In remarks prepared for delivery in Florence, Italy, Yves Mersch
flagged recent decisions by the European Commission such as not to
intensify a so-called Excessive Deficit Procedure against France
and to allow the country two more years to get its finances in line
with EU rules.
"These non-decisions might weaken the corrective arm of the
[Stability and Growth] Pact and undermine the debt rule," he said.
"Moreover, they cast doubt on whether the governance framework can
still play its role as anchor for confidence."
Mr. Mersch said that giving more executive powers to European
authorities for fiscal and economic policy "might be the way
forward" but that this would require that EU treaties be changed.
"Currently, I see little political will for such a move," he
said.
"This makes it even more important to strictly apply and enforce
existing rules and instruments that are meant to act as anchors of
confidence, such as the Stability and Growth Pact and the
macroeconomic imbalance procedure," he said.
Mr. Mersch also pointed the finger at politicians who hide
behind their voters to avoid making decisions to comply with
international rules. He said that he respects that governments are
bound by the will of their voters and "that will might well differ
between jurisdictions in general, and between creditors and debtors
in particular."
But he said he sees "a risk that governments are making it too
easy for themselves when they claim that they cannot make any
further concessions at international level because of domestic
political pressures."
He said that for example initial support for euro was depressed
in the Baltic states, but is now steadily rising as countries in
the region have adopted the currency. Also the public now seems to
back centralized supervision of Europe's banking system at a higher
level than previously was the case. The ECB has been Europe's bank
supervisor since last November.
The evolution of public opinion "suggests that if politicians
want Europe to work for the well-being of its people, they might
need to pluck up courage and seek to shape opinion rather than
follow it," said Mr. Mersch.
Write to Todd Buell at todd.buell@wsj.com
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