ECB’s Stournaras: Now Is Time for Even Bolder Fiscal Measures in EU

29 March 2021

By David Barwick – FRANKFURT (Econostream) – Now is the time for the EU to take yet bolder fiscal measures to ensure the economic recovery, European Central Bank Governing Council member Yannis Stournaras said Monday.

In an op-ed piece for German business daily Handelsblatt, Stournaras, who heads the Bank of Greece, wrote that a ‘side benefit’ of the ECB’s anti-crisis policy measures is that they ‘provide the conditions to make fiscal policies more powerful.’

The actions of the ECB and national governments might however be insufficient, he suggested, noting that the U.S. fiscal response to the pandemic as a share of GDP had been more than twice that of Europe despite the smaller economic contraction there.

Pointing to Europe’s slower progress in vaccinating citizens, Stournaras argued that the current complementarity of monetary and fiscal policy meant that ‘now is the time for even bolder EU fiscal actions until a durable recovery is in place’.

Although debt levels across the EU will require ‘careful monitoring’, that must not prevent fiscal policy from providing economic support ‘as long as necessary’, he wrote.

‘An early withdrawal may entail cliff effects on financing conditions, posing risks to the recovery’, he continued. ‘Only at a point when growth has gained sufficient momentum would it be appropriate to refocus towards achieving medium-term fiscal sustainability.’

Stournaras called for the money allocated to the Next Generation EU recovery fund to be disbursed faster.