Stock markets in Europe and Asia slumped yesterday amid worries about the health of the US economy and Europe’s sovereign debt woes.
US markets, which were closed for the Labor Day holiday, were expected to open lower today. The Dow Jones industrial average fell 2.2 percent Friday after a government report that no net jobs were created in August.
President Obama will deliver a jobs speech Thursday, a day before the Group of Seven wealthiest nations meet in Marseille to discuss the European and US economies. Washington wants to make sure that headwinds from Europe’s crisis do not cross the Atlantic while the US economy remains weak.
Draghi’s call goes to the heart of what politicians now acknowledge is a root cause of Europe’s crisis, but that few seem ready to change: the lack of a federal fiscal union that would make the euro zone look more like the United States.
The idea is something that Germany and others are wary of because it could undermine their national authority.
The calls for what defenders of sovereignty have called the “F word’’ - federalism - are growing louder, however, as investors warn that volatile financial markets are starting to look similar to the days surrounding Lehman Brothers’ collapse.
Trichet, who turns over the central bank presidency to Draghi at the end of October, renewed calls for a federal European government, with a federal finance ministry.
Those institutions would have the power to “impose decisions on countries’’ whose own policies threaten the rest of the euro union, Trichet said at the Paris conference, sponsored by the Institut Montaigne, a research group.
In Brussels, meanwhile, an unusual gathering of former European leaders, academics, and industrialists urged politicians to recognize that part of the answer to Europe’s ills was to give up some sovereignty to keep the euro alive.
“It has become clear that a monetary union without some form of fiscal federalism and coordinated economic policy will not work,’’ the group said in a statement.
