Governments in the euro zone should loosen tough budgetary measures in order to promote growth and help restore normality in the region, according to the governor of the Bank of England (BoE).
Speaking in Dublin on Wednesday evening, Mark Carney called for looser fiscal policy in the euro zone, and for its members to pool their resources.
“(Fiscal policy) is tighter than in the U.K., even though Europe still lacks other effective risk sharing mechanisms and is relatively inflexible. A more constructive fiscal policy would help recycle surplus private savings and mitigate the tail risk of stagnation,” he said, according to a transcript of the speech.
“It would also bridge the drag from structural reforms on nominal spending and would be consistent with the longer-term direction of travel towards greater integration….it would be bold, and it would be favored by fortune.”
His comments come as Greece’s new government go head-to-head with officials in Berlin, who have long promoted a tough stance on austerity in return for financial support. The anti-austerity Syriza party is now expected to attempt to renegotiate the terms of its bailout, amid fears this could lead to Greece exit from the single-currency bloc.
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