ECB zet druk op afbouwen staatssteun banken (en)
EUOBSERVER / BRUSSELS - European Central Bank president Jean-Claude Trichet has said stimulus spending should end "at the latest in 2011" following a meeting of the euro area's 16 finance ministers on Thursday (1 October).
"Its important in our view that exit strategies start when the recovery does," he told journalists in Gothenburg, Sweden, in order to convince businesses and citizens that governments will reverse the huge debt build-up currently underway.
However the group's chairman, Luxembourgish Prime Minister Jean-Claude Juncker, refused to commit to an exact date, indicating that ministers will wait for economic forecasts to be published by the European Commission on 3 November before making a decision.
His views reflect a split amongst ministers. It is understood that Britain, France, Italy, Greece, Spain and Portugal are reluctant to commit to specific start dates.
Also at the meeting, European commissioner for economic and monetary affairs Joaquin Almunia said now was the time to prepare the exit strategies but agreed that implementation should wait until economic recovery takes hold.
He defined recovery as: "growth forecasts in line with our potential growth without the help of the stimulus measures."
Crisis takes its toll on growth
The European Commission warned ministers that euro area potential growth rates have taken a big hit over the past year, cut from "around two percent" prior to the crisis to "around one percent" for the coming decade unless structural reforms are carried out.
"This is patently inadequate if we are to face up to the challenges of an ageing population and if we are to deal with the challenges of employment," said Mr Juncker.
New figures released by EU's statistics office on Thursday will add to the pressure for reform. The data show unemployment for the 16-country euro area rose to 9.6 percent in August, up from 9.5 percent in July. For the EU27, unemployment in August rose to 9.1 percent, compared to 9.0 percent in July.
Mr Almunia signalled that the necessary structural reforms to raise potential growth levels should include changes to the labour market in order to "improve good training ... and provide the right incentives to increase the employment levels in our member states."
Other reforms were needed to improve the functioning of the financial markets and to boost productivity levels, he said. Components of the latter should include a full implementation of the services directive and greater efforts in the area of research and development.
With many ministers showing no apparent appetite to return budget deficits to within the three percent of GDP level allowed under the EU's Stability and Growth Pact, Mr Juncker warned that future deficit cuts will have to be speeded up.
"Once growth returns, we all consider that budget adjustments have to go beyond the 0.5 percent of GDP on which we agreed earlier," he said, a sign that major public spending cuts and tax hikes are likely to await EU citizens.
Currency rates
The finance ministers welcomed the statement made by leaders for the Group of 20 industrialised and developing nations last week, including the commitment to create a framework for balanced global growth.
Economists lay much of the blame for the economic crisis on global trade imbalances that saw countries such as Saudi Arabia, China, and Germany stockpile currency reserves, while consumers in the US and UK ran up debts.
Currency exchange rates are likely to play a central role in preventing the future build up of imbalances, with G7 finance ministers set to return to the issue when they meet in Istanbul, Turkey, over the weekend.