Valdis Dombrovskis tells Alfred Sant, ECB is “achieving its inflation targets”
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Valdis Dombrovskis, Vice President and European Commissioner for the Euro and Social Dialogue said that the European Central Bank is achieving its inflation targets and is also helping to evaluate the debt burdens.
“With inflation approaching the ECB’s targets, we are certainly having faster nominal growth and we are growing out of our debt burdens. There are two ways you can deal with the debt burden: you can try to reduce your debt burden by paying it back or you can try to grow out of your debt burden by growing your economy.
“With inflation approaching ECB’s target certainly we having faster nominal growth and we are growing out of our debt burden,” said the former Latvian Prime Minister when reacting to Dr. Alfred Sant’s intervention at the Economic and Financial Committee at the European Parliament.
Dr. Sant addressed the Economic Dialogue on fiscal surveillance at the European Parliament in Brussels.
“Now we are in a period where the euro itself has reached the lowest ever parity rates with the main world currencies. Will this not mean that the small cluster of economies within the euro zone lead by Germany, which have been relatively high performers will now enjoy the benefits of painless undervaluation in its terms of trade both inside and outside the eurozone?”
“Will this not increase the divergences, economic and other between the two clusters of economies in the zone? Should this possibility be of any interest or concern? Should it be addressed? If yes, what effective tools does the EC have to enable such address?” asked Dr. Sant.
Dr. Sant said that the focus within the euro zone in past years has been on achieving fiscal balance within the national economies where economic divergences between national economies and within them have been growing.
He stated that a dual system has developed where a small cluster of economies led by the strongest economy in the system, the German one, have high productivity and potential for sustained growth; and a wider cluster consisting of the other economies have remained with lower productivity and growth potential.
“Under eurozone conditions, the small cluster has enjoyed undervaluation in its terms of trade with the rest of the zone. This gave it the economic base from which to achieve further economies of scale when selling outside the zone,” said Dr Sant.
Dr Sant was shadow rapporteur for the S&D on the Annual Growth Survey report 2015 which was voted in the March plenary session.