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Euro zone needs fiscal tightening despite growth impact: OECD (Reuters)

BRUSSELS (Reuters) – Euro zone countries must consolidate public finances even though this is likely to dampen economic growth in the near term, the Organization for Economic Cooperation and Development (OECD) said on Monday.

The OECD said that as soon as upward risks to price stability — which the European Central Bank defines as inflation below, but close to 2 percent — in the medium term emerge, the central bank should withdraw its monetary policy stimulus.

ECB interest rates are at a record low of 1 percent now.

“Non-standard measures (of the ECB) should continue to be wound down in line with improvements in the monetary policy transmission mechanism,” the OECD said in a report.

It also stressed that for the euro zone to exit from the sovereign debt crisis it had to restore the banking system to good health and resolve its remaining weaknesses.

(Reporting by Jan Strupczewski, editing by Rex Merrifield)

It, Euro zone needs fiscal tightening despite growth impact: OECD
(Reuters)
citation from US Economy

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