German Deputy Finance Minister Thomas Steffen said financial markets must give the euro area’s crisis-fighting efforts sufficient time to take hold.
“We have to do the right things,” Steffen said at a conference in Brussels today. “We have to concentrate on reforms. And maybe we should also tell the markets, please give us a little bit of time, so we can see the fruits of this work going on.”
Time is needed to generate growth and market confidence will be slow to recover while Europe grapples with high debt levels, Steffen said. Stimulus spending isn’t an answer because any effort to use “fiscal space” could threaten the currency union in the current debt-averse climate, he said.
“Some people recommend that we should use the remaining fiscal space” to foster growth, Steffen said. “To be very honest, I have no clue how to do that and how to use fiscal space, because that means to test the remaining fiscal space” and risk alarming investors.
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