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Thursday, 28.03.2024, 18:06
Eesti Pank head: EU budget, finmin won't help countries in trouble
"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.