EU financial collapse warning as fiscal rule change place ‘inconceivable’ burden on states

EU: Some countries need 'enormous' fiscal adjustment says expert

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

European Union member states face a “risky” financial future ahead as Brussels begins to look at tightening the strings of fiscal rules within the bloc. Economic analyst Zsolt Darvas from the Bruegel think tank in Brussels has warned that some EU countries need “enormous” fiscal adjustment to manage spirally debts as a result of the Coronavirus pandemic. He added that forcing EU states to cut government spending too rapidly could jeopardize economic future growth in the Eurozone.

Mr Darvas told Euronews: “Southern European countries have high levels of debt.

“Some of them could be close to being in a risky situation, especially after the European Central Bank will end quantitative easing because, by that time, the interest rates might go up.

“We made some calculations and found that some southern European countries would need to make an enormous fiscal adjustment in the order of 5-6% of GDP [to meet] that rule, which is simply, I think, inconceivable. 

“It’s impossible that those countries would be able to make that.

JUST IN: Boris plotting early winter general election – Starmer on alert over ‘Labour struggles’

“So, for this particular debt reduction rule, many, many countries will violate that.”

Mr Darvas added the EU Commission needed to learn from the previous Eurozone crisis and not pressure European Capital to slash spending too rapidly. 

He said: “Now the main question is the speed of that adjustment.

“I just hope the European Commission learnt the lesson from the previous crisis, the global financial crisis, and the euro crisis, that a too rapid fiscal consolidation can undermine the recovery.”

Source: Read Full Article