PARIS (MNI) – Although the economic recovery in Europe is still
“fragile,” fiscal policy must prepare to reverse gears from stimulus to
consolidation in order to assure sustainable growth over the long term,
ECB Governing Council member Christian Noyer said Wednesday.
“We need strategies for budget consolidation,” the governor of the
Bank of France told the Finance Committee of the National Assembly.
The worst of the crisis is over, but the recovery remains “fragile
and moderate,” Noyer said. “Globally, we have emerged from recession,
[but] we are still on a very fragile growth path” with great uncertainty
over the level of potential growth ahead.
The interbank market is normalizing and large firms have access to
a dynamic bond market, he said, adding that interest levels are very
low.
While public stimulus programs were key to limiting the impact and
spread of the recession, the risk today is that the resulting high
deficits will undermine confidence, which is “essential” to stimulate
private consumption and investment, Noyer said.
Moreover, high deficits could provoke negative reactions in
financial markets and handicap the access of the private sector to
investment financing, he warned.
The second strategy to assure sustainable growth is to “accelerate
structural reforms,” Noyer said, citing Sweden as an example to follow.
– Paris newsroom +331 4271 5540; Email: stephen@marketnews.com
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