Buba head see no conflict between consolidation and growth

FXstreet.com (Barcelona) - President of the Deutsche Bundesbank Jens Weidmann said on Friday in a speech prepared for the BdF-BBk Macroeconomics and Finance Conference in Paris that there was no conflict between consolidation and growth in the long term and that delaying consolidation in the EU could increase uncertainty on financial markets.

“As a consequence, sovereign bond spreads would remain high or go up even further,” he warned.

The Buba chief stressed that high levels of public debt adversely affect economic growth and that they might also divert banks from price stability. He suggested that growth could be boosted by attaining budget consolidation through spending cuts. Monetary policy alone cannot assure a stable currency, Weidmann stressed, adding that it also depends on sustainable public finances.

Finally, he argued that in the long term the EU should allow for state bankruptcies, as the possibility of default is and important element of market discipline.