Lagarde warns about respect for EU budgetary rules

2 months ago 14

European Central Bank President Christine Lagarde told the ECB forum in Sintra on Tuesday that there is concern about the respect of budgetary rules in the European Union.

Especially now that the reform of the budgetary framework has taken place “within which member states have to operate and control the direction of debt and ensure that it remains sustainable”, fiscal policy is important, Lagarde signalled at the ECB Forum.

They must do so “with flexibility, with sufficient focus on productivity and growth, with investment that leads to both”, she stressed, adding that he hoped that “within the European fiscal framework, countries will look at the structural changes they need to continue to make to have a set of tools” that will allow productivity to improve.

The ECB is “concerned about the fiscal rules that must be respected within the EU and the structural reforms that will lead to an improvement in productivity, which is the only way for Europe to remain strong and prosperous,” Lagarde added.

One of the countries with the most worrying fiscal situation is France, and although the ECB president refused to comment directly on this specific case, she acknowledged that the situation is being closely monitored.

Lagarde also pointed out that the institution must focus on stabilising the financial markets, which is why it is closely monitoring the political situation in France.

“The ECB has to do what it has to do; our mandate is price stability, and we pay attention to that because it’s part of our job,” she said, stressing that they are monitoring such matters.

On the US side, Federal Reserve Chairman Jerome Powell, who was also on the panel, stressed that the country was “running a very high deficit” and that the level of public debt was “not unsustainable, but the trajectory at the moment is”.

“It should be a focus going forward, thinking about how we get back to a sustainable trajectory” for public debt, Powell warned.

Brazil Central Bank Governor Roberto Campos Neto also warned of the risks of high levels of government debt, pointing out that the cost of servicing the debt of the US, the European Union, and Japan was rising, impacting the market.

“Global debt is very high and will start to take liquidity out of the markets,” he said, stressing that “low-income countries are already feeling it”.

In his view, there are several “bills to pay in the future”, such as the “cost of the green transition, the cost of fragmentation, the cost of the pandemic in low-income countries and also energy and innovation”, so it’s important to think about how to achieve a “stable debt trajectory”.

(Mariana Espirito Santo, Lusa.pt)