France Sees Budget Rules Paving Way for ECB
ECB Said to Start 40 Billion-Euro Covered Bond Purchases
Hannelore Foerster/Bloomberg
The European Central Bank, based in Frankfurt, announced its new purchase program on Nov. 3, loosening the conditions compared with a similar plan two years ago to allow it buy from smaller issues.
The European Central Bank, based in Frankfurt, announced its new purchase program on Nov. 3, loosening the conditions compared with a similar plan two years ago to allow it buy from smaller issues. Photographer: Hannelore Foerster/Bloomberg
Tougher budget rules are necessary for euro-member countries if they are to get more help from the European Central Bank in stemming the European sovereign debt crisis, French Budget Minister Valerie Pecresse said.
“Countries need to make a complete commitment to cutting their debt levels and increasing budgetary convergence,” Pecresse said today on France’s Canal Plus television. “Then European institutions will be able to play their full role. That goes for the commission, the council and also for the ECB.”
The remarks come three days after President Nicolas Sarkozy and German Chancellor Angela Merkel agreed to stop discussing the role the ECB should have in tackling the two- year-old debt crisis. Sarkozy, Merkel and Italian Prime Minister Mario Monti agreed in Strasbourg Nov. 24 they would amend European treaties to impose greater fiscal discipline on countries sharing the euro.
“We’re working on re-making the European treaties,” said Pecresse, who is also a spokeswoman for the government. The aim is “new governance for the euro zone, a real regulator and real sanctions to bolster confidence” in the euro, she said.
European Union President Herman van Rompuy has been tasked with presenting EU leaders with proposals for treaty changes at their summit in Brussels on Dec. 9, a spokeswoman for Merkel’s government said today. The spokeswoman didn’t want to be named in line with her office’s policies.
‘Right Way’
“We’re confident that the ECB will find the right way to protect stability of the euro zone within the framework of treaties that give it independence,” Pecresse said. “Obviously it’s not tolerable to have such divergence in interest rates within the same zone for a long period.”
The euro area crisis worsened in the past week as Germany failed to draw bids for 35 percent of the offered amount at an auction of 10-year bunds. Italy had to pay almost 7 percent to sell six-month bills at an auction on Nov. 25, the most since August 1997. Belgium’s rating was cut one step by Standard & Poor’s, which cited the cost of bailing out Dexia SA, a lack of policy consensus and slowing growth.
Europe’s monetary union may unravel sooner than the region’s leaders can mobilize to ensure the sovereign-debt crisis doesn’t overwhelm the currency, according to UBS AG foreign exchange strategists.
“Markets continue to move faster than politicians,” Mansoor Mohi-uddin, head of foreign exchange strategy for UBS, wrote in a note to clients. Markets are starting to “price in the endgame” for the currency, he said.
To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net Stefan Nicola in Berlin at Snicola2@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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