FRANKFURT (MNI) – Both fiscal and monetary policies, need to be
focused more on medium term objectives, European Central Bank Executive
Board member Lorenzo Bini Smaghi said on Tuesday.
Speaking at a conference in Beijing, Bini Smaghi said that we
should look “more at the medium-term objectives of our policies” and
“avoid being led by short-term gains.”
“Once we give a subsidy, it is difficult to take it away,” he said,
suggesting that this also holds true for exiting from very low
short-term interest rates.
The ECB has kept key interest rates at the historical low of 1%
since May 2009. At the same time, it has kept market rates well below
that level by offering banks an unlimited supply of liquidity.
Bini Smaghi said that going forward, “peer-reviewed frameworks
could help to steer policymakers’ choices away from objectives which may
appear beneficial in the short term but are ultimately unsustainable in
the long term.”
In this context, he welcomed the decision made by European finance
ministers made earlier Tuesday to review their budgets in tandem, by
introducing a European “budget semester.”
In the same vein, “the Mutual Assessment Process (MAP) for
sustainable growth launched by the G20 is promising, as some weaknesses
are better seen from the outside,” Bini Smaghi asserted.
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
[TOPICS: M$$EC$,M$X$$$,MGX$$$]