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Eurozone credibility is at stake, says the ECB.

Monday, August 13, 2007 at 10:14

ECB asks Portugal to ensure EU Treaty changes won’t harm central bank independence

FRANKFURT (EUX.TV) — The European Central Bank is growing increasingly concerned over proposed changes to the European Union Treaty that could harm its independence and could make it easier for politicians to influence Eurozone monetary policy.

ECB President Jean-Claude Trichet last week wrote to the Portuguese presidency of the EU to ensure that the bank’s special status within the EU’s structure will be maintained, the Financial Times newspaper has reported.

“Because of its specific institutional features, the ECB needs to be differentiated from the ‘union’s institutions,” Trichet wrote to Portugal’s Europe Minister Manuel Lobo Atunes.

Trichet fears that the ECB would be bound by the same code that applies to the Commission and other bodies – namely to co-operate with each other and to pursue a set of common European values, the paper said.

This subtle change might encourage EU leaders to put greater pressure on the ECB to pursue policies aimed at driving growth and job creation, the FT said. Some argue that the ECB could do so by adopting a more lenient approach to monetary policy.

Trichet-Sarkozy clash

Last month, Trichet already heavily critized French President Nicolas Sarkozy by rejecting a French government call for greater political influence in setting interest rates.

Any attempt to influence the ECB violates the European Union’s founding treaty, an ECB spokesman said last month.

Sarkozy, who says gains in the euro penalize European exporters, has clashed with Trichet in an effort to curb ECB interest rates and weaken the currency.

– From the EUX.TV newsroom news@eux.tv