ECB's Trichet wants more euro zone power over states (Reuters)

BERLIN (Reuters) ? Outgoing European Central Bank President Jean-Claude Trichet called on Monday for euro zone authorities to have greater powers over the economic policies of the bloc's errant members, setting out a vision for a closer-knit currency area.

Speaking as euro zone leaders struggle toward a strategy to fight the bloc's debt crisis, Trichet used his last scheduled public speech as ECB president to call for deeper euro zone economic integration that would impact national sovereignty.

In the speech, entitled "Tomorrow and the day after Tomorrow: A Vision for Europe", Trichet said euro zone states should examine all aspects of each others' economic policies. This would go beyond fiscal policy surveillance.

"For countries that lose market access, the current approach of providing aid against strong conditionality is justified," he said, referring to the rescue packages the EU and IMF have extended to Greece, Ireland and Portugal.

"Countries deserve an opportunity to put the situation right themselves and to restore stability. But ... this approach should have clearly defined limits."

He presented a proposal for dealing in future with a country that persistently fails to meet its economic program targets.

"Under this second stage, euro area authorities like us would gain a much deeper and more authoritative role in the formulation of that country's economic policies," he said.

"Implementing this idea of the second stage would evidently require a Treaty change. It would also imply a new concept of sovereignty."

Trichet, who hands over the ECB presidency at the end of this month to Italian Mario Draghi, made his speech in Berlin's Humboldt University, where protesters held up banners reading 'No more money for the banks', "Say no to debt tyranny" and "Troika out of Greece".

He was briefly interrupted by a woman, who shouted: "How long can we keep on listening to those lies?"

Germany's experience showed how sound policies and bold reforms can allow a country to regain competitiveness and prosper within the euro area, he said.

"Today, Germany is in the lead in rebounding from the crisis ... it sets an example that is very important for the current situation."

In June of this year, Trichet set out a vision for a central finance ministry for the 17-nation euro zone. The case for such an approach had strengthened, he said.

"This European finance ministry would, first, oversee the surveillance of both fiscal policies and competitiveness policies, and when necessary, have responsibility for imposing the 'second stage' I just described," he said in Berlin.

"Increasingly, it seems that it is not too bold to consider a European finance ministry, but rather too bold not to consider creating such an institution."

(Reporting by Paul Carrel and Annika Breidthardt; editing by Ron Askew)

Source: http://us.rd.yahoo.com/dailynews/rss/eurobiz/*http%3A//news.yahoo.com/s/nm/20111024/bs_nm/us_eurozone_future_trichet

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