Draghi prefers to cut spending and not raising taxes to reduce deficit

Draghi, at the beginning of his speech to the European Parliament. / THIERRY CHARLIER (AFP)

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The President of the ECB, Mario Draghi, has warned Monday of the risk that would be to progress now "weakening" the fiscal adjustment in the eurozone and stressed that the answer to the problems is not postponing fiscal consolidation, but mitigate the effects of contraction generated by short-term. He has also advocated act more on the side of spending, cutting games, than the the revenue, where the main route of response is the of raising taxes.

"We are very aware of the situation in which members of the eurozone are currently many States," said Draghi before the Committee on economic and Monetary Affairs of the Parliament European. In this sense, has reiterated to fiscal consolidation must be individually designed for each Member of the eurozone, because there is no general recipe that applies to all, since the pace and speed of adjustment depends also on the initial level of debt of countries which depart.

That Yes, has warned against any minimum weakness by lifting the foot off the accelerator settings. "If fiscal consolidation is weakened, run the risk of losing some of the benefits that have been already made many sacrifices," said Draghi after reiterating that "fiscal consolidation, particularly in countries with a high level of debt, is inevitable".

Now, if this effort compounded the contractive phase of economies, Draghi has been in favor of acting. To do this, however, you must be "an appropriate design of fiscal consolidation, based more on cuts in spending rather than tax hikes", explained the President of the ECB at the time which reminded that taxes in the euro area are already "very high".

The "quick and efficient implementation of structural in product markets and labour reforms" is also key, he has argued, because they will thus increase exports. "There will be at least one component of GDP that is not reduced because the consumption and investment fall in the short term. This way at least improvement in the current account will be", allowing you to mitigate the contractive effects in the short term, he added.

Another aspect is detailed budget plans in the medium term, as they help to generate confidence in the markets, he said. "Detail is crucial, because plans must be credible to reassure the markets and this has to have details," added Draghi.

Finance; Economic; Business

Finance; Economic; Business

Title Post: Draghi prefers to cut spending and not raising taxes to reduce deficit
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