ECB/Lagarde: Reform the Stability and Growth Pact in time | 06/21/21

Written by Hans Bentzin

Frankfurt (Dow Jones) – President of the European Central Bank (ECB), Christine LagardeThe European Union called for a timely reform of the Stability and Growth Pact with its budget rules. “Hopefully there will be an already revised framework when the opening general clause is deactivated,” Lagarde said at her hearing before the European Parliament’s Economic and Monetary Committee. EU deficit rules have been suspended until 2022.

Lagarde acknowledged that during the pandemic, the agreement has given governments ample leeway to take action to combat the crisis. However, the charter must be reformed. “Since the beginning of the Economic and Monetary Union, the macroeconomic context has changed dramatically. Europe needs a modern framework with transparent, flexible and credible fiscal rules that enable counter-cyclicality and a sustainable fiscal policy,” said the ECB president.

They hope that the current audit will provide a solution that meets these requirements. “If you look at this from a monetary policy perspective, the guiding principle of any reform of the Stability and Growth Pact would have to be more countercyclical fiscal policy,” she said.

Often, procyclical fiscal policy has limited the ability of fiscal policy to stabilize production. This in turn often more often monetary policy Sustaining the task of stabilizing the economy and achieving the inflation target.

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(end) Dow Jones Newswires

June 21, 2021 11:59 ET (15:59 GMT)