ECB’s Mersch: Sustained EU Fiscal Stimulus Requires Treaty Change

A top European central banker praised the eurozone’s fiscal response to the Covid-induced economic downturn, but warned that further stimulus would most likely require a legal change to the roles of European institutions.

Far from establishing a precedent for further fiscal integration, the European Commission’s €750 million fiscal package “does not mean that outside of crisis times…common debt issuance should become the norm,” said ECB Executive Board member Yves Mersch in prepared remarks Thursday to a virtual event.

Were such “risk-sharing” to become a more regular occurrence, “the roles of the European Parliament, the European Commission and the Council would have to be reviewed, and such constitutional changes would require a new treaty defining the roles of the bloc’s institutions.

Mersch is due to leave the ECB at the end of December, after completing a non-renewable eight-year term. He is considered one of the more hawkish members of the governing council, at a time when economists are speculating about diverging views among council members with the ECB failing to meet its inflation mandate of close to, but below, 2% since the financial crisis. Mersch will be replaced by Dutch central bank executive Frank Elderson.

The outgoing central banker left open the question of whether he is openly advocating for constitutional changes, saying only, “A Treaty change, if there were appetite for one…could confirm whether the instruments used in this crisis…would be at the EU’s disposal in the event of future adverse shocks.

Laurie Laird

Julie Ros
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Julie Ros

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