PARIS (MNI) – Europe’s governments should reduce their deficits at
varied speeds in order to avert an austerity-induced recession, European
Central Bank Governing Council member Christian Noyer said late Friday.
Accumulating debt to finance operational outlays is neither morally
defensible nor sustainable over the long term, the governor of the Bank
of France said in a televised panel debate, arguing that it was an “easy
and cowardly solution” that burdened future generations.
In France, for example, more than one-third of annual public
spending is funded through borrowing, he estimated.
“The easy years are behind us,” Noyer acknowledged, but he
countered apocalyptic views expressed on the panel by asserting that it
was “entirely possible” to resolve the problem. “I am resolutely
optimistic, while trying to be lucid,” he said.
Some countries, like Greece, have “no choice” but to cut spending
very fast, reduce salaries and hike taxes, Noyer said.
However, “if we adopted very violent austerity programs everywhere
in Europe at the same time, there would be a very negative effect on
growth,” he warned. “If everyone did that it would trigger a recession.”
Other countries, like France, need to adopt credible programs for a
return to budget balance over “several years,” Noyer said. “Extremely
rigorous management of spending” is needed with a “major effort each
year” to reduce outlays.
The French government’s strategy of replacing only half of all
retiring civil servants will have “a very significant impact” over one
or two decades, he predicted.
Noyer underscored the need to restore the solvency of France’s
public pension system, preferably by extending the years of work rather
than hiking payroll contributions.
“Credible conditions for growth” must also be created via
structural reforms, he stressed.
–Paris newsroom +331 4271 5540; e-mail stephen@marketnews.com
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