Abu Dhabi: A UAE newspaper opined that fiscal discipline is more important than loans.
In an editorial, Gulf News noted that Germany’s top constitutional court has cleared the way for the biggest, strongest economy in the European Union to contribute to the EU Stability Mechanism (ESM) and join a fiscal pact designed to build and protect financial stability in the single-currency zone.
However, it opined that the “European Stability Mechanism is not a quick-fix for the debt crises”.
It is unlikely that German politicians would approve any increase in their contributions to the ESM, in the foreseeable future. This means that the Eurozone needs to resolve the debt crisis within the existing resources and whatever time and financial stability the mechanism can buy by providing cheaper loans to its debt-stricken member states; the paper added.
But, the ESM is much more than a mechanism for providing loans at manageable rates. Only those countries that agree to a fiscal pact, which includes a commitment to running balanced budgets, will be able to access its funds. This has made those countries that are most to blame for the volatility on international financial markets, like Italy and Spain, reluctant to ask for help because of domestic political opposition to the austerity measures which are implied by balanced budgets, noted the paper.
More worrying, it is a clear indication that the people and governments of those countries are unwilling to face the harsh realities of their precarious fiscal and economic position, it added.
“However, it is only through fiscal discipline and balanced budgets that the European debt crises will be resolved”, opined the paper.
“Countries need to live within their means to reduce debt and be able to invest in the human and economic infrastructure necessary for the growth needed for a sustainable economic recovery. This is where the real value of the ESM and its fiscal discipline pact lies” the paper stressed.