Europe's central bankers said on Saturday their governments had at best bought time with a $1 trillion rescue, and called for radical action to curb budget deficits and harsh punishments for those who strayed."There is a need for a quantum leap in the governance of the euro area," European Central Bank (ECB) President Jean-Claude Trichet told Der Spiegel magazine.Echoing his call, ECB Executive Board member Juergen Stark said turbulence in the euro zone would calm down only if member countries reformed their economies and cut their deficits."We have bought time, nothing more," he said in an interview with the Frankfurter Allgemeine Sonntagszeitung.Euro zone governments agreed a 750 billion euro ($1 trillion) rescue last weekend to end a crisis of confidence in the euro triggered by financial problems in Greece, which had threatened to envelop the region's much bigger economies.Trichet said financial markets were in their worst situation since World War Two and possibly even since World War One.But he indicated that governments rather than currency markets bore responsibility for the euro's slide, which took it to an 18 month low against the dollar on Friday."It is not an attack on the euro," he said. "It is clear that it is the primary responsibility of the Europeans to take the appropriate measures in order to counter the present severe tensions which have erupted in Europe."Trichet has long urged euro zone governments to cut budget deficits to stop debt piling up. The failure of the Greek government to take this advice led to a debt crisis that risked spreading to other euro zone countries with similar problems."There need to be major improvements to prevent bad behaviour, to ensure effective implementation of the recommendations made by 'peers' and to ensure real and effective sanctions in case of breaches."He also called for far better monitoring of how countries respected the EU's Stability and Growth Pact, meant to cap deficits at three percent of gross domestic product.A COMMON DESTINYSome countries such as Greece have reached nearly four times that level, prompting investors to dump their bonds due to the risk that they might default on their debt repayments.Asked whether Greece should leave the euro zone, he said: "No. This is excluded. If a country joins the euro area, it shares a common destiny with the other members."So far Athens is the only euro zone member to seek bailout funds from the EU and International Monetary Fund -- in return for promising harsh austerity measures which have bought Greeks on to the streets in sometimes violent protests.In Zagreb, EU Economic and Monetary Affairs Commissioner Olli Rehn said bailouts had to be harsh to avoid encouraging reckless behaviour by governments."This mechanism must be made so unattractive that no leader of any (EU) country is voluntarily tempted to resort to this system," Rehn said in a speech."Just ask (Greek Prime Minister) George Papandreou if he is voluntarily willing to resort to this kind of system in the coming term."However, Rehn said that countries in a better situation should not accelerate their budget consolidation, to avoid pushing the overall euro zone back into recession.The ECB began buying euro zone government bonds last Monday, reversing its long-standing opposition to propping up the debt market as its part of the European rescue package.But Stark said the new policy was a product of exceptional times. "These are temporary measures that at most have legitimacy in exceptional situations, and must be constantly kept under review," he said.(Writing by David Stamp; editing by Myra MacDonald)News posted by www.newsinfoline.com
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