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Eurozone needs a political union: central bank governor

2012/07/01 20:27:22

Taipei, July 1 (CNA) Taiwan's Central Bank Governor Perng Fai-nan said Sunday the proposed eurozone banking supervisory body is reassuring but that the real answer to the troubles in the zone is deep political integration among the participating countries.

The financial integration in the eurozone relies only on "loose" fiscal discipline but lacks the form of a fiscal union, said Perng, who was rated as one of the world's top central bankers for the seventh consecutive time last year by Global Finance magazine.

However, a fiscal union, banking union and structural reform will not be enough to solve the debt problem because European nations' policies also involve issues relating to employment, wages, trade and industry, Perng said in an article on the bank's website.

In the long term, the 17 nations in the currency zone need to have deep political integration and reach a form of political union in order to coordinate policies in different areas, he said in the article titled "Political resolution is the key to solving eurozone crisis."

The eurozone countries agreed on June 29 to create a supervisory mechanism that will oversee eurozone banks and allow a rescue fund to recapitalize struggling banks without increasing government debt.

Perng said the eurozone nations have made an important step by reaching the agreement and that it was a "reassuring" development.

Keeping the currency alive and stable is an important responsibility because the euro is not just a currency for the 17 nations, but also a major international currency and international reserve currency, he said.

"Although the euro is a currency giant, it is a fiscal midget," he said.

(By Wu Ching-chun and Jamie Wang)
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