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Eesti Pank head: EU budget, finmin won't help countries in trouble

BC, Tallinn, 17.10.2017.Print version
Eurozone countries should not get their hopes too high on ever-closer fiscal cooperation and a European finance ministry to help out countries in trouble, Ardo Hansson, head of the Bank of Estonia and member of the European Central Bank governing council said in an interview with Politico cited by the Bank of Estonia, informs LETA/BNS.

"So long as only eurozone members already doing well have the fiscal capacity, pushing for additional spending is not the solution to the bloc's economic woes and could even prove counterproductive," Hansson argued. His view directly contradicts ECB President Mario Draghi, who has called on all countries that have fiscal space to use it.

 

"I don't think that it would help the long-term sustainability of the currency union, if you are telling people to do things that do not make a lot of sense from their own perspective," Hansson told Politico.

 

Rather, in his view, the current arrangement of combining joint monetary policy with national fiscal policies is better because it takes into account the differences in business cycles and preserves democratic accountability.

 

Instead of "generating a lot of new ideas," the EU should focus on completing agreed reforms, including the banking union and capital markets union, and ensuring that existing stability and growth pact rules are applied more strictly and evenly, Hansson said. The government of Estonia holds the rotating presidency of the Council of the European Union.

 

Turning to monetary policy a few weeks before a highly anticipated ECB decision about a possible exit from its ultra-loose monetary policy, Hansson called for a more holistic approach to policymakers' communication to break a perceived direct link between the central bank's massive bond buying and its overall policy stance.

 

"The current structure with monetary policy at the union level and fiscal policy largely in national hands is actually not a bad model. Eurozone countries are different in many ways, and it may not be helpful to overly constrict countries' ability to gear policies to their own conditions," the governor of the Estonian central bank said.

 

"The question is: Does it makes sense for us to spend more in the name of the common good, if the price is that we send our own economy, which is already modestly out of balance, even more out of balance?" he asked.

 

Hansson described the idea of euro-area aggregate fiscal stance as "very tricky to apply."

 

"Academically it is interesting, but I don't think it has a lot of policy relevance until countries that need stimulus actually have fiscal space. You would need to have a common budget that is massively larger than it is today," he said.






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