FRANKFURT (Reuters) - A proposed European advisory board to assess national budgets is not strong enough and the euro area needs a fiscal authority with greater powers, Bundesbank President Jens Weidmann said on Thursday.
The body proposed by the European Commission would work too slowly to rein in spendthrift governments and would not have enough power to ensure the Commission respected its recommendations, Weidmann said in prepared remarks in Lisbon.
“This does not bode well for the objective of a more depoliticized application of the rules,” said Weidmann, who also sits on the European Central Bank’s rate-setting Governing Council. “For that, a fiscal council needs to be truly independent, and its recommendations need to carry weight.”
The euro zone has struggled since its inception to find ways to make its member states observe budget rules intended to help them live within the constraints of a shared currency.
The advisory European Fiscal Board was proposed in October with members completely outside the Commission, whose critics say it has bowed to pressure to be more lenient with major countries such as France than with others.
Weidmann said that a powerful authority is needed because the euro area’s risk-sharing arrangement reduces the incentive for sound fiscal policy.
A fiscal union with compulsory centralized decision-making would make the euro zone less vulnerable but there is not enough political support for such a move, Weidmann said.
The best viable option would be to keep economic and fiscal policy decisions at the national level with an independent oversight body that could take some of the political pressure off the European Commission, Weidmann added.
Reporting by Balazs Koranyi; Editing by Ruth Pitchford