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Germany’s Angela Merkel Calls For ‘Urgent Fiscal Reforms’

By Kitco News
Thursday January 22, 2014 11:41 AM

(Kitco News) - At the same time the European Central Bank was surprising markets with a €60 billion monthly asset-purchase program, Germay’s Chancellor Angela Merkel was advocating for “urgent fiscal reforms” in Europe at the 45th World Economic Forum annual meeting in Davos, Switzerland.

In her keynote address Thursday, Merkel said that European leaders must continue to move forward with fiscal reforms if the eurozone is going to emerge strong from it latest economic crisis.

Image courtesy of the World Economic Forum: German Chancellor Angela Merkel

“Time is of the essence,” she said. “Every day we delay is a lost day. We need to promote growth and create long-term jobs,” she said in her speech, according to a WEF press release.

In the past few years, European countries have been reluctant to enact difficult austerity measures, preferring instead to spur economic growth by increasing public spending. However, Merkel said the growth-austerity argument is a false dichotomy.

“Germany has shown that growth-oriented fiscal policy is possible,” she said.

With interest rates remaining at historically low levels, Merkel said that European nations need to manage their debt levels now to ensure that “onerous burdens are not passed on to the next generation" as rates eventually rise.

“Now is the time to get our houses in order,” she said.

Merkel is not alone in the opinion that the eurozone needs to implement fiscal reforms. In his opening remarks, following the central bank monetary policy meeting, ECB President Mario Draghi reiterated that accommodative policies will only support the economy so much. He added that reforms should be implemented swiftly, credibly and effectively.

“In order to increase investment activity, boost job creation and raise productivity growth, other policy areas need to contribute decisively,” he said.  “Fiscal policies should support the economic recovery, while ensuring debt sustainability in compliance with the Stability and Growth Pact, which remains the anchor for confidence,” he said?

Economists and market analysts have also been calling for more fiscal reforms.

In a recent interview with Kitco News, Neil Mellor, senior currency strategist at Bank of New York Melon, said the only way the eurozone will be able to support sustainable growth is by implementing new fiscal policies.

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By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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