–Says EU Budget Rules Need To Focus On Sustainability
BRUSSELS (MNI) – The response of financial markets to perceived
risks in the Eurozone seem overblown, Patrick Honohan, the Governor of
the central bank of Ireland and a member of the European Central Bank’s
Governing Council, said on Monday.
“Heightened market concerns about the fiscal situation in some
countries have spilled over to banks and sovereigns, in turn hampering
the transmission of low monetary policy rates throughout the euro area,”
Honohan said, according to the text of a speech delivered at the 2010
INFINITI Conference in Dublin.
“Frozen interbank markets reflected what seemed an overblown
response to perceived fiscal risks,” he said.
Honohan said the EU’s budget rules as set out in the Stability and
Growth Pact need “the addition of a focus on sustainability of the
fiscal accounts, and not just on a particular deficit or debt level.”
He added: “Ireland was not the only country for which the downturn
had a very unusually sharp and large impact on the deficit, reflecting
the unsustainability and transient nature of a large part of the tax
system.”
On financial transaction taxes, Honohan said: “I suspect that the
conclusion will be that they do little for improving the efficiency or
safety of the financial system and also would not generate as much
revenue as some suppose.”
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]