The European Central Bank (ECB) denied today it was willing to let eurozone governments postpone targets for achieving budget stability if the region does not stage a healthy recovery.
The Financial Timeshad quoted "senior ECB officials" as saying the European Union's stability and growth pact, under which governments set target dates for putting their budgets in balance or surplus, may need to be interpreted more flexibly due to the severe slowdown.
"The ECB is opposed to a change in the pact as suggested by the article," an ECB spokesman said. "Our position regarding the pact has not changed".
The FTnoted the ECB believed governments should continue to adhere to the goal of achieving fiscal balance over the medium term. There was also no suggestion governments might ignore the pact's stipulation that deficits should not normally exceed 3 per cent of GDP.
But it quoted officials as saying the stability pact, drafted by the European Union in 1996, was drawn up under different economic conditions and should be "intelligently adapted".
"It's difficult to say this now, especially in public. But next year, if the economic rebound isn't significant enough, it will have to be addressed," FTquoted one official as saying.
The paper noted the ECB was not in charge of administering the stability pact, so it would actually be up to governments to set new target dates.
But the ECB's attitude is crucial because it could theoretically tighten monetary policy if it thought governments were breaking fiscal commitments.
AFP