ECB hopes new eurozone pact will mean earlier intervention

(BELGRADE) - The European Central bank hopes a pact to coordinate economic policy, to be adopted by eurozone nations next week, will mean broader surveillance and earlier intervention, a top ECB official said Friday.

"We have given our input into the design of this new (mutual surveillance) process and we hope it will be implemented as foreseen," Gertrude Tumpel-Gugerell of the ECB executive board said at a press conference in Belgrade.

"We hope to see earlier intervention if countries build up imbalances and lose competitiveness," she said.

She added that the bank believed that "the surveillance should be broadened focussing not "only on public deficits but (taking) into account debt levels and other indicators of competitiveness like unitary cost and current account balances".

A March 24-25 summit in Brussels will discuss a preliminary agreement within the 17-nation eurozone to adopt the so-called "Euro Pact", drawn up under pressure from Germany and France.

In return for strengthening debt rescue funds, the pact foresees greater budgetary discipline and economic policy convergence in order to ensure countries rein in national debt.

Tumpel-Gugerell was in Belgrade to sign an EU-funded cooperation program with the National Bank of Serbia to support its in implementing the central banking standards of the European Union.

The two-year program will look at 11 different areas of cooperation to close the gap between the Serbian National Bank and the EU best practise including financial sector supervision and liberalisation of capital movements.

At the press conference Tumpel-Gugerell also commented on the recent boost for Serbia's image when the international Standard and Poor's raised Belgrade's long-term rating for loan procurement, raising it from 'BB-' to 'BB'.

"I think it is an important element indicating confidence in the country," the top ECB official said.

While Serbian central bank governor Dejan Soskic said the upgrade was slight he added that it is an important sign for Serbia.

"It is a good signal but there is no cause for celebration," he said, adding that Belgrade "must step up (its) efforts".

"The perception investors have of Serbia is still not as good as we would like," he said.