Germany Weber automatic sanctions ：punish an unstable fiscal pol

UPDATE: ECB's Weber: No Intention Of Restructuring Greek Debt
.Article .EmailPrinter
FriendlyShare:
facebook ↓ More.
.StumbleUponDiggTwitterYahoo BuzzFarkRedditLinkedIndel.icio.usMySpace Text (Adds information in the fifth and last paragraphs.)

FRANKFURT (Dow Jones)--The current debate on improving euro-zone governance may, at best, result in the public doing a better job of disciplining governments in future than the euro zone's governments have, Deutsche Bunde*****ank President Axel Weber said Thursday.

"Particularly in view of the demand for automatic sanctions in the case of violations of the Stability and Growth Pact, there is no real progress to be expected," Weber said at a dinner organized by the American Chamber of Commerce.

"One can still hope that the discussion helps to sensitize the public to the problem," he added. "A heightened public perception could make it harder in future to sidestep sanctions through the political process."

Weber was speaking as EU leaders gather to review the proposals of a task force under EU Council president Herman van Rompuy on reforming the governance of the euro area.

The ECB and EU Commission hopes to enshrine a mechanism with automatic sanctions on countries with excessive deficits have already been dashed by the lack of support from France and Germany.

"You've heard that the sanctions are to be made 'quasi-automatic,' Weber said. "The trouble is that means they are staying 'quasi-political,' too."

The German government abandoned its support for the idea of automatic sanctions under French pressure in return for a French pledge of support for changes to the EU Treaty so as to allow countries burdened by excessive debt to be put into an "orderly insolvency procedure." The aim of this would be to force private creditors to share the cost of a debt restructuring, rather than have a bail-out funded by taxpayers elsewhere in the euro zone.

"If private investors in government bonds, they have to carry the risks accordingly and include them in their calculations," Weber said. "Only then will they punish an unstable fiscal policy in time with rising risk premia."

Financial assistance from the taxpayers of other countries should only then be available "as a last resort and under specific conditions," Weber said.

In response to questions from the audience, Weber stressed that there is no intention of restructuring Greece's existing debt. Rather, he said, it was more a question of creating clarity in the event of future crises.