Image via WikipediaThe president of the European Central Bank has urged Eurozone governments to tighten fiscal discipline and, if necessary, commit funds to protect the monetary union.
As reports swirled of the ECB bulk buying Irish and Portuguese bonds, Jean-Claude Trichet said on Friday that euro member states must take a "quantum leap" in order to strengthen economic governance.
"The tensions associated with the Irish fiscal problems and the reorganisation of its banking sector have led to renewed bouts of high volatility in financial market," Trichet told the European American Press Club in Paris.
"More than ever it is important that governments step up consolidation in way that is credible and lays the foundation for sustainable long-term growth."
The president called for a new system of mutual surveillance of government fiscal policies as a means of preventing "excessive" budget deficits.
He suggested that poorly performing governments should face sanctions and targets for the reduction of public debt towards a 60 per cent ceiling.
"Europe's leaders should recognise that our economic model is in need of a considerable strengthening, especially our system of economic governance," he said.