FRANKFURT (MNI) – If European countries make the necessary reforms
to fiscal policy and to economic policy coordination, no new crisis
management mechanism will be needed, European Central Bank Executive
Board member Juergen Stark said in an article published Monday.
Surplus countries need to take measures to strengthen their
domestic economies by creating incentives for investment and employment,
the ECB’s chief economist wrote in an op-ed piece for Germany’s
Financial Times Deutschland.
Stark rejected the need for a change in European treaties to allow
for a new crisis mechanism — a move that is envisioned in proposed new
EU fiscal rules hammered out last week following an agreement on that
point by the German and French governments.
“Rather, if reforms in fiscal policy and with coordination in
economic policy are successful, such an institution would never need to
act and would, thus, be unnecessary,” Stark countered.
The hawkish Council member also warned that countries might ease
their budget-cutting zeal “as soon as a certain degree of deficit
reduction has calmed markets.”
Europe needs “depoliticized fiscal and macroeconomic supervision,
tougher and stronger binding budgetary rules,” he argued.
“In order to be credible, sanctions need to bite long before a
country gets into economic difficulties,” he said.
While no Eurozone country is spared the need for budgetary reform,
and the pressure to act is “especially high” for countries running
current account deficits, surplus countries must also change, Stark
asserted. They “must take steps to strengthen the domestic economy by
creating incentives for investment and employment,” he urged.
There has been a longstanding public debate in Germany and abroad
about the need for the country to raise domestic wages in order to
stimulate consumption and reduce the country’s dependence on exports for
growth.
–Frankfurt bureau; +49-69-720142; tbuell@marketnews.com
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