Eurozone fiscal rules 'should be revisited': ECB's Draghi
Frankfurt am Main (AFP) –
European Central Bank chief Mario Draghi said Monday that eurozone fiscal rules "should be revisited" to allow countries more flexibility to spend where needed to boost growth and fight downturns.
The guidelines "are sensible, in the sense that they avoid accumulation of excessive debt or deficits, but they clearly are not as effective as a countercyclical stabilisation rule," Draghi told the European Parliament lawmakers in Brussels.
"That's why I said fiscal rules should be revisited," he added.
Rules established under the Treaty on European Union and later the Stability and Growth Pact commit EU and eurozone countries to minimise annual budget deficits and limit government debt.
Some countries have achieved compliance through either years of austerity or economic good fortune, while others lag behind with massive debt mountains.
As in the past, the future might bring "asymmetric shocks" that slow one member state's economy without harming others too badly, Draghi warned.
In that case, "they should find the buffers that could help them to overcome their situation," he added.
Meanwhile above the level of individual nations, "there are destabilisation shocks in the overall eurozone economy where a central fiscal tool can be very important," he said.
Many economists and central bankers argue that the eurozone needs a centrally managed fiscal capacity to respond to downturns with fresh spending.
But politicians, especially in the better-off northern parts of the eurozone, have proved reluctant to follow the recommendations.
In June, finance ministers agreed only a compromise "Budgetary Instrument for Competitiveness and Convergence", or BICC, that will lack the firepower of the hundreds of billions of euros demanded by French President Emmanuel Macron.
"To be effective this fiscal tool must have an adequate size and must operate in an automatic fashion, so that it's timely," urged Draghi.
But "of course it has to come with responsibility by individual member states, and that's why it's so difficult to find an agreement," he acknowledged.
In opening remarks before the EP's economic affairs committee, Draghi reiterated his early September declaration that "fiscal policy must make a more decisive contribution" to growth and inflation in the eurozone.
Such a course enjoyed "unanimous consensus in the governing council" of the ECB, made up of the six-person board and 19 governors of member state central banks, he added.
© 2019 AFP