EU/ECB Urges Other to Increase Fiscal Spending
Yesterday, the European Central Bank decided to start another stimulus package, by cutting deposit rates and introducing another bond buying QE programme which will start in November. But I guess that’s not enough because the Euro turned bullish after the initial knee-jerk reaction and the ECB doesn’t look confident. They are urging other entities such as governments to start fiscal stimulus if they have space for it.
ECB’s Coeure:
- Governments with fiscal space should act
- There is a very strong view in the ECB that fiscal policy must take charge
- Fiscal policy and structural reforms are needed to get full benefits from ECB policy
- Underlying euro area inflation is muted
- Risks to economic growth remain tilted to the downside
EU’s Dombrovskis:
- Countries that have space for fiscal stimulus should stimulate economy
- Countries that don’t have space for fiscal stimulus should otherwise engage in structural reforms
Can you guess who they are aiming these comments at? Obviously not Italy since the EU has been screaming and shouting at how high Italy’s debt is. France has also exceeded the deficit ceiling for this year that the EU has put in place. So, they are turning to Germany. But, Germans are how they are, so it will be a difficult task convincing them to increase fiscals spending, but let’s see if this will work.
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