By Laurie Laird
FRANKFURT (MaceNews) – The incoming president of the European Central Bank stressed the importance of structural reform and expansionary fiscal policy in her final public speech before taking over the reins of the bank, echoing the increasingly-urgent calls of her predecessor, Mario Draghi.
Addressing leaders of Europe’s financial and political worlds, Christine Lagarde praised Draghi’s “wisdom” during the financial crisis. “Your decisiveness and commitment inspired confidence,” particularly among policy makers, said the former head of the International Monetary Fund.
Lagarde did not mention monetary policy to an audience that included German Chancellor Angela Merkel, French President Emanuel Macron and Italian President Sergio Mattarella, instead recalling Draghi’s continued argument “for structural reforms that have been started but not yet completed.” Such focus on fiscal policy could suggest that Lagarde, a former French finance minister, may double down on efforts to convince northern European governments to loosen the purse strings as the European economy slows.
The outgoing ECB president argued even more forcefully for European fiscal stimulus. “Today we are in a situation where low interest rates are not delivering the same degree of stimulus as in the past,” Draghi said. “Monetary policy can do so faster and with fewer negative side effects if fiscal policies are aligned with it.“ Draghi was criticized by central bank officials in Germany, Austria, France and the Netherlands after announcing a rate cut and the resumption of quantitative easing following his penultimate meeting as president in September.
Draghi also waded into the contentious area of further European financial integration, calling for greater unification of fiscal policy and of national capital markets. “We need a euro area fiscal policy of adequate size and design …. National polices cannot always guarantee the right fiscal stance for the euro area as a whole.”
— Courtesy of MT Newswires