Brussels, 12/07/2002 (Agence Europe) - In its July monthly bulletin published on Thursday, the European Central Bank (ECB) launched a new appeal to Member States in the Euro zone to respect the budgetary targets set down in the Stability Pact, without having to meet unrealistic conditions or accountancy u-turns. Wim Duisenberg warned in the editorial of the ECB monthly bulletin that only the determined implementation of all aspects of the Stability and Growth Pact would maintain any credibility. He also explained that this involved the necessary conditions for maintaining political and economic confidence based on stability and in this connection, made a number of recommendations aimed at certain countries:
Once again stressing that budgetary objectives had to reflect efforts at making structural improvements that were sufficiently ambitious and based on realistic plans for growth ( a remark that could have been aimed at France, which recently reiterated its commitment to bring its budget close to balance in 2004 at the latest, leading to 3% growth over the next two years: Editor's note);
Resist all temptations to artificially improve the budgetary balance by creative accountancy, and ensuring total transparency in public accounts (last week saw a lively polemic between Italy and the European Commission on the subject of applied accountancy criteria in public deficits).
Beyond budgetary considerations, the ECB points out that although it did not change its rates at the last Board of Governors Council, despite the upward risks of inflation it was because of uncertainties about the strength of the recovery both outside and inside the Euro zone. The ECB report points out that these uncertainties have not decreased over recent weeks, as borne out by indicators on consumption and developments on the financial markets. These latter considerations could lead to increasing worries about "first pillar" inflationary pressures, namely the M3 total. The ECB thinks that these risks are becoming more apparent, as well as the excess liquidity in the Euro-zone in relation to financial needs, which in the long term requires non-inflationary economic growth. The ECB concludes that there is an increased risk with this substantial liquidity excess, which could translate into inflationary tension, particularly in the context of an economic recovery in the Euro-zone.