V. Vasiliauskas: fiscal union would make sense, should principle of responsibility apply equally to all
On 9 September, Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, will attend an Economic and Financial Affairs Council (ECOFIN) meeting to discuss new measures to ensure financial stability in the euro area. The debate among the Governors of EU central banks and ministers for finance on issues related to the fiscal reform will be held in Bratislava, Slovakia, current holder of the presidency of the EU Council.
‘Even though clouds over the euro area economy are clearing, its growth is still unsatisfactory. The chances of new potential storms are realistic, yet efforts put in by some countries or authorities are insufficient,’ said V. Vasiliauskas, highlighting that in this stage only collective, joint and well-coordinated decisions, equally applicable to all counterparties, can ensure desired results.
The Governor of the Bank of Lithuania observed that the accommodative monetary policy implemented by the European Central Bank (ECB) produced tangible results — boosted confidence of financial market participants, reduced borrowing costs and substantially promoted lending to the real economy. According to him, however, the single euro area monetary policy is unable to fight off with equal efficacy the challenges faced by countries that differ in terms of debt and deficit levels, have distinct structural issues and are going through different cycles of economic development.
Having been on the search for solutions promoting economic recovery and enhancing economic growth for nearly a decade, Europe, in the opinion of V. Vasiliauskas, still lacks general fiscal measures that would be sufficiently effective, hence the Bank of Lithuania supports the initiative of the Slovak presidency to consider closer fiscal integration and is ready to actively participate in the debates held in Bratislava. In assessing the importance of these measures and the meeting in general, the Governor of the Bank of Lithuania said: ‘the proposed general fiscal measures might render a real shift towards the EU fiscal union, thus today, entering the initial engineering stages and seeking to create a viable construct, we must make sure that its functioning is based not only on the principles of solidarity between countries, but also joint responsibility and application of equal standards.’
‘Before considering new ideas, we must eradicate old vices’, noted the Chairman of the Board of the Bank of Lithuania, stressing that jointly-adopted decisions must be fully complied with, while solidarity between countries cannot translate only into regular transfers of funds to countries unwilling to put in efforts to undergo a structural reform. He is convinced that the newly-created general fiscal measures and rules for their implementation should be simple, comprehensible and virtually inevitable, as defaults in obligations and exceptions made to violators dampen confidence in the system of rules and do not encourage adherence to it. The European Commission has submitted to EU countries recommendations for reform implementation; however, none of the 102 recommendations put forward last year have been fully implemented.
Boosting openness in the EU single market, especially in terms of capital, and a common deposit guarantee scheme would add to better risk management in the EU financial system.