Monday

22nd Apr 2019

ECB defends stability and growth pact

Just some days after Romano Prodi called the euro-zone's Stability and Growth Pact "stupid", the European Central Bank, (ECB) revealed an unprecedented statement to defend the pact, saying it was "indispensable for economic and monetary union".

The ECB statement is clearly a response to Mr Prodi’s remarks, but also France said it had no intensions to cut its budget deficit next year in order to meet the rules. The ECB blames the member states for not following the rules. "Problems have arisen not because the rules are inflexible, but as a result of some countries' unwillingness to honour their commitment to respect the rules," the statement said.

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According to the ECB, the results of fiscal policy in several countries are very disappointing. In this context it is important to recall that the main reason why countries are in budgetary difficulties at present is because they have not used the situation of higher growth to substantially improve their fiscal position, announced ECB.

"The game of chicken between the ECB and EU finance ministers continues and it would seem now likely that the ECB will cut rates in December rather than November, given this particular intervention," said economist Julian Callow at CSFB, reports the Guardian.

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