Trichet Urges EU Governments to Tame Deficits to Boost Growth

Discussion in 'Wall St. News' started by Cdntrader, Jul 4, 2010.

  1. Trichet Urges EU Governments to Tame Deficits to Boost Growth
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    By Mark Deen and Helene Fouquet

    July 4 (Bloomberg) -- European Central Bank President Jean- Claude Trichet pressed governments to trim their budget deficits, saying such action would boost economic growth by improving confidence of consumers and investors.

    “We are in a period where we have to manage budgets very tightly,” Trichet told journalists in Aix-en-Provence, France. “I have no problem with austerity, rigor. I call this good budgetary management.”

    The comments reinforce plans set out by Group of 20 leaders last month in Toronto, where the countries representing 85 percent of the world economy responded to plans by European governments to tackle the region’s sovereign debt crisis by slashing budget deficits.

    Advanced G-20 economies pledged June 27 to halve deficits by 2013 and start to stabilize their debt-to-output ratios by 2016. While President Barack Obama is pushing his counterparts to focus on spurring growth, leaders in the U.K. Germany, Spain and Italy are already tightening spending to bolster investor confidence.

    Economists at Goldman Sachs Inc. and BNP Paribas SA have trimmed their growth forecasts, partly in response to the spending cuts and tax increases already announced. Trichet said today that deficit reduction won’t choke growth and a failure to stem budget gaps would be equally risky for the recovery.

    “Confidence is key for growth, and if you cannot have confidence in the sustainability of the fiscal policies then you have no growth because you have no confidence,” he said. “The two things are complimentary.”

    Trichet urged European governments to boost growth through structural changes and to publish results of stress tests on banks as part of their efforts to boost confidence in the financial system.

    “Industrialized countries as a whole, on both sides of the Atlantic and Japan have to reinforce their capacity to adapt to an environment which is changing rapidly -- to embark on structural reforms,” he said.
  2. These guys are just asking for it.

    Might help bond market but its gonna break equities in the short run.