European Central Bank (ECB) president Jean-Claude Trichet added to the pressure on European Union member state governments by MEPs when he called for a "quantum leap" on economic governance, the European Parliament said in a statement.

Trichet was addressing the EP's economics committee on June 21 2010.

Towing a very similar line to that developed in an EP resolution on economic governance adopted by a large majority last week, Trichet said that policy-makers needed to follow up their words with deeds and advocated for strong surveillance of economic policies, "quasi-automatic" sanctions for under-performing countries, and much more binding power to European Commission proposals regarding budget corrections to be made by a country, the statement said. 

During his regular meeting with the committee's MEPs, Trichet also gave his customary assessment of the economic situation in the EU and explained the ECB's May decision to buy Eurozone bonds.

The new economic governance architecture

MEPs were quick to pick up on the ECB's vision of economic governance as outlined in its paper published earlier this month, the European Parliament statement said. 

Sylvie Goulard (ALDE, FR) questioned the idea of creating an independent fiscal agency which would take care of vetting member states' budgets, arguing that this would undermine the European Commission's powers. 

Trichet said that independence would give the body the strength it needed but also pointed out that the ECB's suggestion was to place this body in the Commission.

Astrid Lulling (EPP, LU) asked whether fiscal federalism and economic governance were the "same thing".

Trichet replied that what was pragmatically possible now was to argue for the equivalent of fiscal federalism based on much stronger surveillance of budgetary and competitiveness policies since a truly federal system would require a treaty change.

Markus Ferber (EPP, DE) suggested that it should be the ECB itself which assessed member states' policies, considering that the Commission may also be too linked to the governments. 

"The ECB is already part of the assessment process.  We are always available if needed." Trichet said. 

Other MEPs also suggested that the ECB should enter the economic governance arena more, with Nikolaos Chountis (GUE/NGL, EL) saying that part of the "quantum leap" should include a change in the role and functions of the ECB.  Trichet regularly rebutted that the ECB's mandate is price stability.

Out of the debt and into recovery

Attention was also given to the buying by the ECB of Eurozone bonds to prevent financial instability in the EU, stemming from rapid increases in the risk premiums of sovereign debt in certain countries of the EU, the statement said.

Trichet said that the exceptional circumstances had led the ECB to take this action so as to ensure that the real economy would not suffer from problems in government bond markets.

Ivo Strejcek (ECR, CZ) asked for information about the bond purchasing programme, arguing that the lack of transparency was incorrect.  Giving some figures of purchases over the past weeks, Trichet said that it was the finer details that had not been published. 

Zoran Thaler (S&D, SK) remarked that people were unhappy about the recent actions with regards to Greece. 

Could the option of Greece leaving the Eurozone temporarily be plausible, Thaler asked. 

"This is not my working assumption," Trichet said. On the blame game surrounding the Greek debt crisis, Godfrey Bloom (EFD, UK) suggested that it was always easy to blame others, the statement said.

Turning to the economic recovery more generally, Philippe Lamberts (Greens/EFA) challenged Trichet about austerity being conducive to recovery. 

"Austerity programmes undermine our ability to do our best", he said.  Trichet replied that the recovery had to go hand in hand with budgetary prudence in order to regain the people's confidence, without which a true recovery would not be possible.

Governance debate continues

The members of the economic and monetary affairs committee were scheduled to continue their work on economic governance on June 22, when discussions were to begin on a report calling on the Commission to propose legislation on governance and detailing how the European Parliament would be included further in the process.