Euro zone needs growth and austerity: ECB's Asmussen

Mon May 21, 2012 8:03am EDT
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BERLIN (Reuters) - Europe's fiscal pact must not be renegotiated or softened but could be complemented by growth-enhancing measures, European Central Bank Executive Board member Joerg Asmussen said on Monday.

Asmussen also stressed that the ECB's non-standard measures - introduced to fight the debt crisis - were of a temporary nature and could be withdrawn any time if inflation risks emerged.

There is a growing push in the euro zone, led by newly elected French President Francois Hollande, to do more to stimulate growth and not just focus on reducing deficits.

Asmussen said the debate on growth versus austerity was the "wrong debate" to be had.

"We need both," he said in a speech in Berlin, though he stressed the need for fiscal consolidation and reforms.

"The fiscal compact can be complemented by growth-enhancing measures. This makes sense as a supplement, but the fiscal compact cannot be renegotiated or softened," he said.

Asmussen, who has been on the ECB board since the beginning of the year after previously serving as German deputy finance minister, suggested adding goods and labor market reforms to the existing fiscal compact.

Such reforms could, for example, boost the mobility of the labor force and include offering language courses and a European network for job placement, which Asmussen said could be financed via the European Investment Bank or so-called project bonds, which have been suggested as a way to boost infrastructure financing.

"The growth-enhancing measures will only have an impact, if a critical mass is implemented. The legal form that the measures then take is less important," Asmussen said.   Continued...

A sculpture showing the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt February 29, 2012. REUTERS/Alex Domanski