ECB President Jean-Claude Trichet on Monday urged euro zone states to immediately approve the strengthening of the EFSF bailout fund decided in July to combat the debt crisis, amid signs some were dragging their heels.
Mr. Trichet also said governments were only half-way through the reforms needed to strengthen the fragile financial sector and called for stronger governance in the euro zone, including the possibility of a central override on decision-making by countries who fail to stick to budgetary rules.
On Sunday, the head of a junior government party in Slovakia said parliament would not vote until December at the earliest on the strengthening of the €440-billion EFSF euro zone joint rescue fund agreed in July, much later than the early October deadline euro zone officials are targeting.
“It is clear ... that we have an absolute and total need for all of the decisions to be implemented immediately as was decided...by the different heads of state and government,” Mr. Trichet said at a conference in Paris.
Mr. Trichet said that a volley of structural economic reforms were needed in the euro zone to improve productivity and increase growth and employment potential.
With the euro zone bearing the brunt of a global debt crisis, he said there was a consensus that the single currency zone needed a substantial strengthening of its Stability and Growth Pact, which governs member states’ fiscal behaviour.
“One can imagine that tomorrow, going further than what is currently foreseen, if despite recommendations a country doesn’t take or is incapable of taking the required decisions, it should be possible to take them from the centre, from the centre of the single currency,” Mr. Trichet said.
“One can imagine a federal government.”
He said a more centralized economic government in the euro zone should have responsibility for the banking system, allowing the financial sector to decouple from sovereign risks.