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21 May 2012

Reuters: ECB's Asmussen - Eurozone needs growth and austerity


European Central Bank Executive Board member, Jörg Asmussen, said that Europe's fiscal pact must not be renegotiated or softened, but could be complemented by growth-enhancing measures.

Asmussen also stressed that the ECB's non-standard measures - introduced to fight the debt crisis - were of a temporary nature and could be withdrawn any time if inflation risks emerged.

Asmussen said the debate on growth versus austerity was the "wrong debate" to be having. "We need both", he said in a speech in Berlin, though he stressed the need for fiscal consolidation and reforms. "The fiscal compact can be complemented by growth-enhancing measures. This makes sense as a supplement, but the fiscal compact cannot be renegotiated or softened", he said.

"The growth-enhancing measures will only have an impact, if a critical mass is implemented. The legal form that the measures then take is less important", Asmussen said. He stressed that such project bonds were not the same as jointly issued eurobonds, an idea which Hollande and some other eurozone leaders are expected to promote at an informal summit in Brussels.

Asmussen pointed to the need for a homogeneous, Europe-wide financial regulation framework and a joint financial market watchdog for financial institutions operating across borders, as well as a bank resolution mechanism.

He suggested launching a special fund from the EU budget to stabilise the euro area, adding that a financial transaction tax - currently under discussion - could feed into such a fund, which could also strengthen the European Parliament.

"Usually one is more careful with expenditures if one is also responsible for raising the necessary income. This could be done step by step for the European parliament; for example a financial transaction tax could feed into such a special fund along with the EU budget if such a tax was implemented in the euro area alone."

Full article

Full speech (in German only)



© Reuters


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