In a new economic situation, the stability criteria would have to be adjusted, says the ESM boss.
(Photo: AP)
Berlin The head of the European rescue mechanism ESM, Klaus Regling, has spoken out in favor of raising the debt ceiling agreed in the EU. The rules of the monetary union “have to be adapted to the changed economic conditions”, Regling told the magazine “Der Spiegel”. The debt ceiling of 60 percent of economic output is “no longer up to date”.
The European Stability Mechanism (ESM) was created after the world financial crisis from the experience of the Greek crisis and is a financial institution with its own share capital. Since 2012, he has been helping euro area countries with financial problems that could endanger the monetary union. For this he imposes conditions.
It should be clear to politicians that “a state can borrow too much, but also too little,” said Regling. He praised the measures planned by Italy, which are to be financed from the European reconstruction fund. They offer the best prospect of “bringing the economy on a growth path and thus bringing the debt level down”. Debt servicing costs little to Italy because of the low interest rates. “In 1993 the government in Rome had to spend almost twelve percent of economic output on interest,” said Regling. “Today it is a little more than three percent.”
The ESM boss also warned that an excessive reduction in government borrowing could lead to a “lack of safe investment opportunities for investors”. This could push the interest rate even further.
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