Change EU treaty to stabilize bloc: Trichet (Reuters)

PARIS (Reuters) ? European Central Bank President Jean-Claude Trichet said the European Union's treaty should be changed to prevent one member state from destabilizing the rest of the bloc, and urged stronger governance of the euro zone.

"In my view it is necessary to change the treaty to prevent one member state from straying and creating problems for all the others," Trichet said in interview broadcast on French radio Europe 1 and iTele television on Sunday.

Asked whether this would mean getting rid of vetoes for member states, he said: "To do this, one even needs to be able to impose decisions."

But he added that he expected existing governance rules would be applied much more rigorously in the future, even without a change in the treaty.

"I think that the lesson of the cost of negligence, of the cost of lax management is sufficiently potent that in future the rules -- which have also just been reinforced -- will be followed much more strictly."

All advanced economies were being affected by a crisis at the moment but Europe's particular problem was that some countries had not respected treaty rules, Trichet said.

"We don't have a federal budget, we don't have a political federation so we have to fully respect the constraints and the mutual supervision rules that exist in the euro zone," he said.

"It is the case that in Europe we have a bigger problem than others and this is a problem of supervision and governance within the euro zone," he added.

GLOBAL GOVERNANCE

Trichet, who steps down as ECB president at the end of this month after an eight-year term, said European governments needed to take clear steps to tackle the crisis hitting the euro zone.

"I think it is important that convincing direction is given in the three areas I have mentioned: protecting sovereign signatures in Europe; protecting banks and all financial institutions so that they can do their job of financing the economy; and the specific but important problem of Greece."

Trichet was speaking after a gathering of G20 finance chiefs in Paris at which they pressed the European Union to act decisively at a summit on October 23.

Trichet told the Financial Times on Thursday that the ECB had reached the limits of what it can do to support financial markets and that it was now up to governments to grapple with the persisting debt crisis in the euro zone.

In Sunday's interview, he said the ECB had taken exceptional measures in the past four years, notably in offering unlimited liquidity at fixed interest rates, adding that the central bank had not gone beyond its role set out in the Maastricht Treaty.

The euro remained an "extremely credible" currency and the euro zone was "not under threat," he said.

The ECB estimates that the euro zone "probably" experienced growth in each of the first three quarters of this year, he said and added that regarding the fourth quarter: "we will see."

The financial crisis had also shown the need for stronger global governance, Trichet said, saying he saw this as a message from protests that brought thousands onto the streets across the world on Saturday.

"It is our task to make the world financial system much more solid ... that is how I interpret part of the message that comes from this movement," he said.

(Editing by Sophie Walker)

Source: http://us.rd.yahoo.com/dailynews/rss/business/*http%3A//news.yahoo.com/s/nm/20111016/bs_nm/us_ecb_trichet

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