European Central Bank President Jean-Claude Trichet has said that he expects Europe’s economic recovery to continue at a moderate pace, but the outlook remains uncertain.
He told the European Parliament’s economic and monetary affairs committee that there should be tougher scrutiny of national budgets and sanctions for countries that breach the rules.
“The new framework should be well-targeted, notably on countries with high debt-levels and significant losses of competitiveness. Public debt levels as well as the evolution of deficits can be a source of financial instability and contagion across countries sharing a common currency,” Trichet said
He also rejected the idea of a financial transaction tax in the EU.
Trichet said it would present ‘major difficulties’ and could cause capital to flee elsewhere.
He told the European lawmakers that ECB’s experts believe such a tax would only work if applied globally – which is not possible.
France and Germany have led the calls for a financial transaction tax.
They want to recover some of the billions spent on bailing out banks in the financial crisis.