Commenting on the fiscal policy of the euro zone, European Central Bank (ECB) member Klaas Knot has said that Europe needs new budgetary rules so that public spending can maintain an oversized role in the coming years, as reported by Reuters.
Key Comments:
“As the current low interest rate environment is likely to persist, we need a structurally more important role for fiscal policy in macroeconomic stabilization in the foreseeable future. “
“Tax flexibility is necessary and it has to be an integral feature of the frame, rather than an all-or-nothing button that may or may not be pressed in an emergency. “
“But the new rules they should not unleash governments to spend, so ‘strong and credible’ rules are also needed to keep debt sustainable and ensuring that spending adds to productivity, so that spending eventually pays for itself. “
On the other hand, the head of the monetary policy formulation of the ECB, Robert Holzmann, pointed out that if inflation exceeds 3%, the central bank should reconsider the strategy.
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