Large-scale joint EU borrowing should remain one-off: Weidmann

imageEconomy4 hours ago (Oct 19, 2020 12:15PM ET)

(C) Reuters. G20 Finance Ministers and Central Bank Governors Meeting in Fukuoka

FRANKFURT (Reuters) – Joint borrowing by European nations to overcome a pandemic shock should remain a one-off, Bundesbank President Jens Weidmann said on Monday, seemingly rebuffing European Central Bank President Christine Lagarde’s call for a common budgetary tool.

With the continent reeling under the weight of a coronavirus-induced recession, European Union leaders agreed on an unprecedented 750 billion euro recovery package, funded by a joint debt issuance, a once-taboo subject long criticised by Germany.

“What is worrying is the large-scale borrowing at the EU level,” Weidmann, who also sits on the ECB’s Governing Council said in a speech. “This kind of borrowing should remain a one-off crisis measure, as permanently raising joint debt does not square with the EU’s institutional framework.”

His comments come just hours after Lagarde said she hoped that Europe’s “extraordinary” scheme could remain in the European toolbox and there would be a debate about a common budgetary tool for the euro zone.

But Weidmann argued that shifting financial liability to the euro zone level would require member states to transfer fiscal policy powers to the bloc as well.

“Much closer political integration would be needed and, eventually, the EU would have to evolve into a democratic federal state,” Weidmann said.

Instead, euro zone countries could exercise better fiscal responsibility and ensure solid finances, he argued.

Large-scale joint EU borrowing should remain one-off: Weidmann

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>