AMSTERDAM, Nov 29 — Central banks are reaching the limits of their toolkit for spurring growth and employment, raising the risk of asset bubbles, Dutch Finance Minister Jeroen Dijsselbloem said.
Growth in the euro area “is very weak” and “we cannot accept this kind of slow growth,” Dijsselbloem, who chairs meetings of euro-area finance ministers, said in a speech in Berlin today. What’s needed is respect for European Union debt and deficit rules, “structural reforms” and private capital to complement a planned EU-wide investment program, he said.
“Monetary policy in many international regions is running out of effectiveness,” including in the euro area, as central banks are set to drift toward “bigger and bigger” measures, Dijsselbloem said at an economic conference. “The risk of bubbles could be a future threat to our economic revival.”
Dijsselbloem’s comments echo a warning by German Finance Minister Wolfgang Schaeuble in August, reflecting an alliance between the two nations that included backing tough conditions for sovereign bailouts during Europe’s debt crisis. Even so, Dijsselbloem said he supports what the European Central Bank “is doing within its mandate to allow economic recovery.”
The Dutch finance chief criticised the French government for its budget deficit, saying France has a strong economy that needs more dynamism. Germany is “trailing behind” in the digital economy and should open up its “still very protected” market for services, he said.
Euro-area finance ministers will discuss the fiscal picture in France, Italy and Belgium at a meeting on Dec. 11 after the European Commission gave those countries an extra three months to meet EU deficit and debt rules, Dijsselbloem said.
“We’re going to discuss it seriously in the Eurogroup and going to make sure that this is a serious process,” he said during questions and answers after the speech. The EU’s Stability and Growth Pact needs to be “completely trustworthy and strong.” — Bloomberg
