Knot says eurozone governments must lead efforts to prevent debt crises

Klaas Knot says eurozone governments bear primary responsibility for preventing future debt crises, arguing that central banks can step in during market turmoil but cannot replace sound public finances.

The former head of the Dutch central bank made the comments in an interview with Italian newspaper Corriere della Sera. He is one of two candidates to become the next president of the European Central Bank (ECB).

Knot said central-bank intervention could be unavoidable if financial markets became disorderly. In such circumstances, he said, a central bank had the firepower to restore order. But he argued that safeguards should ensure countries put their economic fundamentals in order, and that the ECB could not substitute for healthy budget policy.

His remarks come amid scrutiny of France’s high debt and the government’s difficulty in reducing budget deficits. The report said yields on French government bonds had risen sharply, partly as a result.

Knot’s rival for the ECB presidency is former Spanish central-bank chief Pablo Hernández de Cos. Media reports suggest de Cos’s chances are growing, according to Nieuws.nl.