Fiscal and monetary policy must be better coordinated in the euro area, with more discipline in government spending needed to avoid fueling inflation, according to Bank of France Governor Francois Villeroy de Galhau.
(Bloomberg) — Fiscal and monetary policy must be better coordinated in the euro area, with more discipline in government spending needed to avoid fueling inflation, according to Bank of France Governor Francois Villeroy de Galhau.
The European Central Bank policymaker said negotiations over new fiscal rules in the European Union are an opportunity for such a realignment and there should be “binding thresholds” for annual efforts to consolidate public finances.
Villeroy said there are some encouraging signs on inflation easing, but it still remains “too high.” He declined to comment on the ECB’s decision on Thursday to extend its record tightening cycle with a 10th straight increase in interest rates.
“Monetary policy is the first line of defense, and the main remedy,” Villeroy said in a speech at the Eurofi conference on the sidelines of a meeting of European finance officials in Santiago de Compostela, Spain. “But our collective fight against inflation calls for a more appropriate policy mix.”
He singled out his own country for repeatedly failing to meet objectives to repair public finances. The French government, which has pushed back against proposals for benchmarks in European fiscal rules, will present its detailed budget plans later this month.
“I strongly hope the next pluri-annual public finance programming bill and the 2024 budget will demonstrate increased commitment and credibility,” Villeroy said.
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