The European Central Bank (ECB)
said in its 2015 annual report out Thursday that balancing
national budgets must be done in such a way as to foster growth.
The ECB urged countries still struggling to put their
financial houses in order - such as Italy and Spain - to
continue their spending reviews, to make their tax systems more
favorable to growth, and to crack down on tax evasion.
The ECB also urged countries to reduce their fiscal wedge -
i.e. the gap between employers' labour costs and employees'
take-home pay.
The situations of Italy and Spain are "not comparable"
because Italy's deficit has not risen 3% of national GDP in
recent years, said ECB Vice President Vitor Constancio.
"Italy's problem is its elevated debt, but it has been
contained thanks to the surplus it has always maintained,"
Constancio said.
ECB President Mario Draghi wrote in his preface to the
report out the outlook on the global economy remains uncertain.
Given persistent deflationary forces on a global scale there are
questions as to Europe's direction and its capacity to withstand
new shocks, he wrote.
Negative effects intensified in 2016, making an even more
expansive monetary policy on the part of the ECB necessary,
according to Draghi.
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