Threaten or punish?

21 October 2010 By Pierre Briancon

The ECB president thinks the FrancoGerman deal on budget discipline doesn’t go far enough on imposing sanctions for wayward euro zone members. Still, agreement on the principle of setting up a resolution scheme to deal with future crises could open the way for meaningful reform.

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JeanClaude Trichet, the president of the European Central Bank, wants euro zone governments to know he is unhappy with the reforms they are considering to strengthen fiscal discipline, according to a report in the Financial Times and confirmed by Reuters.

Trichet, who has long advocated a system of automatic sanctions against wayward countries, has asked that the ECB's dissent be noted in a document on reforming the EU stability and growth pact currently being discussed by euro zone governments, the FT reported on Oct. 21.

"It is correct that the President of the ECB does not subscribe to all elements of the report," an ECB spokesman told Reuters.

Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor, on Oct. 18 agreed on a compromise on reinforcing fiscal discipline, and called for a "framework to ensure orderly crisis management" in the future in case of major debt problems in the euro zone.

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"It is correct that the President of the ECB does not subscribe to all elements of the report," an ECB spokesman told Reuters.

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