FRANKFURT (MNI) – The Eurozone has come to the end of its banking
crisis, but further challenges remain, including improving economic
surveillance and strengthening the Growth and Stability Pact, European
Central Bank Vice-President Lucas Papademos said before Parliament.
“I would agree that over the past few years economic surveillance
has not been sufficiently adequate,” Papademos said during the question
and answer period following his ECB annual report 2009 presentation.
“Economic surveillance has not been particularly effective, not
necessarily in monitoring, but in assessing the increasing divergences
of competitiveness.”
Thus, “we’re looking forward to on one hand the strengthening of
the Stability and Growth Pact and institutional framework that will help
to prevent accumulation of fiscal imbalances,” Papademos continued. “But
at the same time the broadening of economic surveillance.”
Focussing his comments on Greece, the central banker said that the
Mediterranean country would need to complete its restructuring program,
which he expects to be in early May, before the activation of any aid
mechanism.
“Our own contribution would put special emphasis on issues that
relate to fiscal adjustment,” Papademos said, highlighting the
importance of reforms that would boost Greek competitiveness.
However, he also stressed the need for such reforms to be
consistent with the ECB’s price stability objective. “I think it is very
important that national economic policies, labour market policies and
structural reforms are designed and implemented in a way that is fully
consistent with objective of ECB and single monetary policy to maintain
inflation at close to but below 2%,” Papademos said.
“This is a fundamental benchmark to the design and implementation
of national economic policies.”
Papademos also commented on the International Monetary Fund (IMF)’s
participation in the Greek financial assistance mechanism, saying that
the Fund’s involvement, combined with that of the other Eurozone states,
was a “workable solution” to the country’s fiscal woes.
“What is important is the program is completed in timely manner and
that it addresses root causes of Greece’s structural problems,” he said.
“There will not be difficulties in reaching a common position.
(Differences will be) addressed effectively and an agreement will be
reached,” Papademos added.
Papademos also commented on the International Monetary Fund (IMF)’s
participation in the Greek financial assistance mechanism, saying that
the Fund’s involvement, combined with that of the other Eurozone states,
was a “workable solution” to the country’s fiscal woes.
“What is important is the program is completed in timely manner and
that it addresses root causes of Greece’s structural problems,” he said.
“There will not be difficulties in reaching a common position.
(Differences will be) addressed effectively and an agreement will be
reached,” Papademos added.
The central banker also said that he felt key lessons from the
Greek fiscal crisis had been learned, “first and foremost in Greece”.
“Both the public and government realize the need for achieving
sound fiscal positions and reforms to the economy.”
Other countries, however, would also have drawn lessons from the
crisis, as the situation in Greece would serve as a “wake-up call” for
those facing similar problems “to address and restore competitiveness
and achieve sound fiscal positions”.
Shifting his comments to the Eurozone as a whole, Papademos
stressed that the aim of stable public finances is to support economic
growth and will help to restore confidence.
“This is the reason why fiscal consolidation and sustainability of
public finances is considered a policy aim,” he said. “If it is not
taken, then inevitably interest rates and the crowding out of private
sector will have adverse effects.”
“I would expect in countries that are undertaking significant
fiscal adjustment in the short-term, they will benefit over the
long-term, from the effects of this fiscal adjustment because of the
lower cost of funding at the end and the release of resources that will
be available for the private economy,” the central banker continued.
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