9 August 2001, 14:57  More reforms needed in fiscal policy, markets-ECB

FRANKFURT, Aug 9 - The European Central Bank on Thursday gave its recipe to ensure long term economic growth in the euro zone, pushing governments for more tax reforms and privatization and less intervention in markets. Governments should press on with more reforms in public finance and market deregulation, the ECB said, now that the Stability Pact and measures to enhance competition had already lead to a healthier economic environemnt. "By contrast, progress in achieving more efficient fiscal policies via structural reforms has been far more limited. Responsibility lies with the national governments," the ECB said in its August monthly bulletin. In the Stability Pact, the 12 countries in the single European currency have agreed on reducing their budget deficits to zero in a number of years. They have also agreed on several measures to increase competition. But long-term economic growth and low unemployment and low inflation could only be reached by governments making an extra effort on top of these policies already agreed upon. The ECB, which determines borrowing costs in the euro zone, said governments should cut spending when cutting taxes and that progress was needed particularly in social benefit systems and in the privatisation of public sector goods. "Benefit reforms, including urgently needed pension reforms, have been largely piecemeal and half-hearted," the ECB said. "Consequently, in the euro area the public sector and the tax burden remain much larger than in most competitor countries and employment rates remain low," it added. It also said privately managed pension funds and the privatisation of public sector goods were needed for better fiscal discipline and would in the end lead to lower taxes. The ECB also said in its monthly bulletin, in which it aired uncertainty about the euro zone's economic performance in the second half of the year, that more progress was necessary in economic sectors that had previously been sheltered. It cited the telecommunications sector and energy, postal and air and rail transport markets as examples. "Much progress remains to be made in all areas of product market reform covered...," it said. The ECB has previously said economic growth in the euro zone would be between two and 2.5 percent this year and the next. Economic growth in the first quarter of this year was up 0.5 percent.

© 1999-2022 Forex EuroClub
All rights reserved