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European monetary fund backed by ECB's Trichet |
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Monday, 15 March 2010 |
 The head of the European Central Bank has given his tentative support to the idea of a bail-out fund to bolster the eurozone's financial stability. "We have seen the proposal. I would say it deserves examination," Jean-Claude Trichet said.
The idea - of a European version of the International Monetary Fund - is
aimed at avoiding a repeat of the sort of financial crisis engulfing
Greece.
Mr Trichet also said the crisis should not deter financial innovation.
"Financial innovation should continue," Mr Trichet said after a speech
in California. "It would be a big, big mistake" if it did not.
'Good idea'
German Chancellor Angela Merkel has already expressed cautious support
for a European monetary fund.
She said it was "a good and interesting idea", but warned that a new
European treaty might be necessary to create it.
"There has been a proposal that was made by, in particular, academics
and a proposal by the minister of finance in Germany," Mr Trichet said.
He added that any such fund should not be called a "monetary" fund, as
it should be created by the member states, with a "very, very strong
conditionality" placed on it.
The crisis over Greece's huge debts has hurt the euro and raised the
prospect of a bail-out by the other 15 countries that share the euro.
France and Germany have resisted IMF involvement in Greece's financial
woes.
Greece's deficit is more than four times higher than eurozone rules
allow, and it is trying to reduce it.
Proposed government spending cuts have sparked protests and nationwide
strikes.
European Union rules state that no nation in the euro bloc should have
an annual budget deficit which is higher than 3% of its gross domestic
product.
Greece has pledged to reduce its deficit from 12.7% to 8.7% during 2010.
Its long-term deficit-cutting plan aims to reduce the budget shortfall
drastically, to less than 3% by 2012.
German Finance Minister Wolfgang Schaeuble had said that "for the
internal stability of the eurozone, we need an institution that has the
experience and power of the IMF".
Source: BBC
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