Eurozone ministers urge to reduce deficits and debts in ‘difficult times’

European Central Bank President Christine Lagarde addresses a news conference following the Monetary Governing Council meeting in Frankfurt, Germany March 10, 2022. Daniel Roland/Pool via REUTERS

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LUXEMBOURG, June 16 (Reuters) – Eurozone finance ministers on Thursday called for a return to fiscal discipline to help the European Central Bank tackle the risks of a renewed debt crisis in the bloc amid context of high inflation, declining growth and market tensions.

At a regular meeting in Luxembourg, ECB chief Christine Lagarde briefed ministers on the bank’s announcement of a so-called anti-fragmentation tool that would offer new support to the bloc’s most indebted countries . Fragmentation is the term used in the bloc to refer to the risks associated with high spreads between member state governments’ borrowing costs read more .

“All member states need to return to sound public finances, we need to reduce our deficits and we need a reliable path to debt reduction,” German Finance Minister Christian Lindner told reporters ahead of the meeting. .

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Government borrowing costs soared on the periphery of the 19-nation currency bloc after the ECB unveiled plans last week to raise interest rates to rein in painfully high inflation.

But Lindner played down the risks of fragmentation caused by high spreads between German Treasuries and bonds issued by more indebted countries, such as Italy.

“We are seeing spreads increase, but there is no need to worry,” he said.

His Austrian counterpart Magnus Brunner had the opposite message: “We are very concerned” about spreads and fragmentation risks, he told reporters.

However, he had a similar solution to the problem as that suggested by Lindner.

“Get your budgets in order,” he urged countries, noting that this would allow the ECB to more effectively tackle the risks of fragmentation.

In what could be seen as a veiled criticism of the ECB’s measures to support the most indebted countries, he said: “The rules must apply to all member states. No different rules for different Member States.

At the meeting, Lagarde largely repeated the content of the ECB’s previous announcement on efforts to calm markets, an official familiar with the discussions told Reuters, without giving details.

Dutch Finance Minister Sigrid Kaag told reporters the ECB sent “an important signal” by calling an extraordinary meeting on Wednesday when it announced plans for an anti-fragmentation tool.

She said “these are not easy times”, adding that fiscal stability and the fight against inflation were of crucial importance.

Her Spanish counterpart, Nadia Calvino, welcomed the ECB’s announcement as an “effective” decision, and said the ECB and eurozone governments were committed to ensuring the strength and resilience of the euro zone.

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Reporting by Francesco Guarascio @fraguarascio Editing by Frances Kerry

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