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ECB chief warns euro aspirants to stick to sound fiscal policies

European Central Bank chief Jean-Claude Trichet called on new European Union member states Thursday to stick to sound economic policies if they wanted to have any hope of joining the euro in the coming years.

Speaking at a press conference following a meeting of the European Central Bank’s 21-head governing council, Trichet said it was important for nations seeking to join the eurozone to maintain “a sound fiscal policy, a sound structural policy and a sound wages policy.” He went on to say that when economies such as those in Central and Eastern Europe were seeking to catch up with more advanced economies, they should not hesitate to run budget deficits.

The ECB president also expressed confidence that central bankers in the new EU member states should be able to deal with the inflationary pressures that had been unleashed across the region as a result in part of high energy costs. “They have the means to counter the pressure that is coming,” Trichet told reporters. But despite a series of questions on the ambitions of Slovakia, Bulgaria and Romania to join the euro, Trichet declined to comment specifically on the economic and financial outlooks for the three nations. The former French central bank chief did, however, note that there would be “a rendezvous” early in the new year to discuss Slovakia’s hopes of joining the euro in January 2009.

Nations such as Bulgaria and Romania, which joined the EU last year, are unlikely to be serious contenders for euro membership until well into the next decade, economists say. If successful, Slovakia would become the second former communist state after Slovenia to sign up to the eurozone. Thursday’s ECB meeting marked another historic step in the expansion of the bank’s governing council, this time to 21 to include the central banks of Malta and Cyprus following their admission this month to the eurozone. The adoption of the euro by Malta and Cyprus on January 1 brought the eurozone’s membership to 15. Malta and Cyprus, along with Slovenia and Slovakia, are members of the so-called class of 2004 - the 10 largely Central European nations that joined the EU in May 2004. (m&c.com)