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that the ECB’s non-standard measures - introduced to fight the debt crisis - were of a temporary nature and could be withdrawn any time if inflation risks emerged.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.
Asmussen stressed that such project bonds were not the same as jointly issued euro bonds, an idea which Hollande and some other euro zone leaders are expected to promote at an informal summit in Brussels this week.
Germany reiterated on Monday its opposition to the introduction of euro bonds.
Germany has said it will only consider jointly underwritten euro area bonds once the conditions are right, meaning closer economic integration and coordination across the euro zone, including on fiscal matters. But this is still a long way off.
Asmussen also said that, ultimately, a fiscal union as well as a banking union and a democratically legitimate political union were needed to stabilize the euro zone.
“The answer to the crisis is not less, but more Europe,” he said.
Asmussen pointed to the need for a homogeneous Europe-wide financial regulation framework and a joint financial market watchdog for financial institutions operating across borders, as well as a bank resolution mechanism.
He suggested launching a special fund from the EU budget to stabilize the euro area, adding that a financial transaction tax - currently under discussion - could feed into such a fund, which could also strengthen the European Parliament.
“Usually one is more careful with expenditures if one is also responsible to raise the necessary income. This could be done step by step for the European parliament, for example a financial transaction tax could feed into such a special fund along with the EU budget if such a tax was implemented in the euro area alone,” Asmussen said.
In a sign of an intensification of the debt crisis, it emerged last week that the ECB had stopped providing liquidity to some Greek banks as they had not been sufficiently recapitalized.
Asmussen said four Greek banks had currently no access to the ECB regular liquidity operations because they were not sufficiently capitalized and were now on emergency liquidity assistance (ELA), provided by the Greek central bank.
Reporting by Annika Breidthardt, writing by Eva Kuehnen; Editing by Susan Fenton