German Finance Minister Wolfgang Schaeuble said there’s “no room for adventure” in boosting growth through public spending even for countries that are close to achieving sound public finances as they must remain “anchors of stability.”
While substantial progress has been made in reducing budget deficits in Europe, it’s important for governments to pursue credible fiscal adjustment, Schaeuble said in a speech prepared for delivery today at the plenary session of the International Monetary Fund’s steering committee in Washington.
“We are facing a huge fiscal challenge,” Schaeuble said. “Many advanced economies have not built up sufficient fiscal buffers in ’good times’ before the crisis -- including in Germany.”
Schaeuble’s comments underline Germany’s position that deficit spending and monetary stimulus can’t solve the euro region’s sovereign debt crisis. They contrast with U.S. Treasury Secretary Timothy F. Geithner’s comments today that European governments and the European Central Bank should proceed “creatively, flexibly and aggressively” to support troubled euro countries.
Chancellor Angela Merkel’s Cabinet on April 18 approved budget projections prepared for the European Commission that show Germany will effectively eliminate its deficit in 2014, two years ahead of a deadline set in the constitution.
Since 2011, Germany’s three levels of government -- federal, the 16 states and communities -- are bound by the constitutional “debt brake” to reduce their combined structural deficit in steps to a maximum 0.35 percent of gross domestic product by 2016.
Members from the 20 biggest economies should redouble their efforts to adhere to commitments made at a leaders’ meeting in Toronto in 2010 to halve their budget deficits by 2013 and stabilize debt, Schaeuble said.
“Not only Europe is facing major fiscal challenges,” Schaeuble said. “The United States and Japan in particular need to tackle their public deficits and debt.”