Bundesbank board member Andreas Dombret said euro-area governments don’t have an alternative to implementing structural and fiscal reforms.
Countries should aim for “a gradual and steady improvement of their competitiveness and fiscal positions,” Dombret said in Vienna today, according to his e-mailed speech. “There is no substitute for such an adjustment process at the local level.”
While firewalls “can buy time and serve as a tool for commitment to implement necessary reforms,” they can’t be a “substitute for restoring solvency,” he said. “This can only be achieved through economic adjustments and structural reforms, in which case a firewall may well be helpful.”
Dombret also said that policy makers observed “clear signs of a systemic financial crisis” at the end of 2011. After the European Central Bank’s record cash provision, fiscal reforms and Greece’s debt restructuring “managed to mitigate the stress to some extent,” tensions “have renewed due to doubts of the solidity of the fiscal positions of some countries.”
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