Olli Rehn, the European Commission?s top economics official, urged euro zone countries on Thursday not to ease up on efforts to tackle their budget deficits, saying sound finances were key to securing long term growth.
Most euro zone governments are seeking to cut their budget deficits via austerity policies, often at great cost to their electorates and the chances of economic growth.
Rehn called on the countries to stay their course despite the pain.
?Sound public finances are – and will remain – the cornerstone of our strategy. They are a prerequisite for sustainable growth,? Rehn told a conference at Oxford University, according to remarks released in Brussels by his office.
?Relaxing consolidation could at best provide short-lived relief, but very soon endanger fiscal sustainability in many member states – especially in the medium and long term.? Newly elected French President Francois Hollande is leading a drive to shift Europe?s focus away from budget discipline toward growth.
Rehn said reforms had reduced macro-economic imbalances significantly but said governments needed to do more.
?However, more adjustment is still to come. The remaining accumulated stocks of internal and external imbalances continue to pose a formidable challenge. Some deficit countries still need to achieve surpluses to bring their external debt onto a declining trajectory,? he said.
?We need to maintain the momentum of the wave of reforms that is currently moving in Europe, especially in the countries that need them most. Italy and Spain are taking decisive action in this regard,? Rehn said.
He said the Greek pace had been stalled by vested interests, lack of national unity and weak administrative capacity but the reform programme had been drafted to keep Greece in the euro zone.
On economic growth, Rehn said it would remain uneven across the region. Data released by the EU?s statistics office Eurostat on Tuesday showed the euro zone economy stagnated in the first quarter, with sharply differing fortunes in the bloc. [Reuters]