Dutch central bank governor: EU debt rules need to be more flexible


Knott added that European governments should be able to boost economic growth through spending when interest rates are low and when central banks have no room to maneuver, which is not sufficiently provided by current rules.The Dutch central bank governor continued by saying that while member states have welcomed the suspension of the debt ceiling within the European Union amid the Corona pandemic, an “all or nothing” approach is not the best way to achieve a balanced economy.

“Resilience has to be in some way a feature that is more ingrained in the system, not one that arises only in emergencies,” Knott, who is also a member of the European Central Bank’s Governing Council, said in a speech from Rotterdam on Friday.

He continued, “As the current low interest rate environment is likely to persist, we need a larger role in the structural aspect of fiscal policy for macroeconomic stability for the foreseeable future.”

The European Union suspended its fiscal rules, which normally limit the budget deficit to 3 percent of GDP, after the coronavirus triggered the most severe recession in modern history.


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