* ECB policymakers push for staying the debt-cutting course
* Say sustainable growth needs sound fiscal policies
* ECB sees room to cut rates, but impact small
By Martin Santa and Sakari Suoninen
BRUSSELS/FRANKFURT, April 24 ECB policymakers
rebuffed suggestions that Europe should ease up on austerity and
said that while the central bank has room to cut interest rates,
such a move would not necessarily help the economy much.
European Central Bank Vice-President Vitor Constancio said
that seeking to stimulate economies by stopping measures aimed
at cutting government debt could merely increase countries'
borrowing costs rather than triggering growth.
Finance leaders of the G20 economies last Friday edged away
from a long-running drive toward cutting spending and raising
taxes in rich nations, rejecting the idea of setting hard
targets for reducing national debt in a sign of concern about a
sluggish global recovery.
With budget cuts blamed for a second straight year of
recession in the euro zone, the EU's top economics official Olli
Rehn indicated over the weekend that more flexibility on tough
economic targets was needed.
His boss, European Commission President Jose Manuel Barroso,
said on Monday that austerity had reached its natural limits of
Recent surveys and data have pointed to economic weakness
spreading to the euro zone core, and on Wednesday Germany's Ifo
sentiment indicator came in weaker than the most pessimistic of
forecasts as poor exports undermined Europe's largest economy.
"We certainly still have some margin of manoeuvre to take
decisions, and as (ECB) President Draghi said in the latest
press conference, we stand ready to act if economic conditions
continue to provide bad news, as has unfortunately been the
case," Constancio told the European Parliament in response to a
But ECB policymakers did not accept that weaker growth was a
reason to change course on reform, insisting that more balanced
budgets were essential to revive sustainable growth.
"Economic adjustment, both internal and external, has been
significant, has implied high costs in terms of unemployment and
should not (be) put into risk of unravelling now," Constancio
told the European Parliament.
Joerg Asmussen, who sits on the ECB's Executive Board, also
spoke of a risk of slipping back and warned against taking the
current market calm for granted.
"(A) sound fiscal condition is really a precondition for
growth," he told the Financial Times. "If one postpones fiscal
consolidation to a later day, that comes not without risks."
ECB Governing Council member Ardo Hansson said EU states
must push economic reforms further, strengthen public finances
and avoid complacency.
German Bundesbank President Jens Weidmann had a stern
message for France, the euro zone's second major economy, which
is slipping already this year from commitments to cut its budget
Lessons should be drawn from earlier breaches of debt
limits, Weidmann said. "France especially has an important role
to serve as an example for credibility of the rules and trust in
the sustainability of public budgets."