stretch budget rules too far, ECB's Coeure tells EU
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[July 09, 2014]
ATHENS (Reuters) - Sound
fiscal policies are essential for euro zone countries to
grow out of debt, and existing budget rules should be
applied rather than being stretched so far that they
lose credibility, a European Central Bank policymaker
EU leaders signaled at a summit last month that they were ready to
give member states extra time to consolidate their budgets as long
as they pressed ahead with economic reforms. Leaders agreed to make
"best use" of the flexibility built into EU budget rules.
ECB Executive Board member Benoit Coeure warned governments that the
flexibility "cannot be based on empty promises".
"New growth will not be generated by new debt. On the contrary:
sound fiscal policies are essential for growing out of debt," Coeure
said in the text of a speech for delivery in Athens on Wednesday.
"Therefore, the existing rules should be applied, and they should
not be stretched to a point where they would lose their
credibility," he added in the speech, which was entitled 'Investing
in Europe: Towards a convergence process 2.0'.
Italian Prime Minister Matteo Renzi, who took over the European
Union's rotating presidency this month, has led calls for Europe to
move from budget austerity towards expansion.
Coeure described the European economy as undergoing a "moderate
recovery", adding that "growth is only resuming at a slow pace".
Stressing that complacency would be unwarranted, he urged euro zone
governments to step up structural reforms.
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In the longer term, once growth has resumed and trust been restored
between countries, Coeure said "the convergence process could
culminate in the transfer of certain budgetary responsibilities to
the European level with a view to strengthening risk-sharing within
the currency union."
(Writing by Paul Carrel, editing by John Stonestreet)
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