France has committed itself to faster economic reforms aimed at boosting growth in the wake of the ECB decision to inject billions into the European economy.
The ECB’s decision “should not stop us from carrying out reforms,” French president François Hollande said.”We must speed up [reforms]. This is what France will do.”
France has consistently been in breach of EU budget deficit targets, as the French economy struggles to emerge from the economic downturn. Mr Hollande, a Socialist president, also told reporters at Davos that large corporates “must also make the choices that correspond to our common interests.”
France was singled out by the George Osborne, the UK chancellor of the exchequer, as needing to implement reforms. He said that the quantitative easing announced on Thursday would not solve the problem of low growth. "It is necessary but not sufficient. Governments in Italy and France need to take the opportunity to implement structural reforms," he said.
The German Finance Minister Wolfgang Schauble, also at the World Economic Forum, called for Euro zone governments to press ahead with structural reforms in the wake of the ECB's decision. He warned that some countries might "misunderstand" the nature of the ECB's move.
Speaking before he left the summit Taoiseach Enda Kenny welcomed the ECB’s quantitative easing programme .
"It is in keeping with the ECB's remit. Anything that will help price stability at a European level is good for Ireland, it's good for jobs, it's good in terms of what it means for the hospitality sector. We hope that this will lead to lower interest rates for businesses and for consumers."
Asked about the ECB’s decision not to fully mutualise the programme, the Taoiseach said:”That’s a decision taken by the ECB and obviously we’ll run with that. There is an element of risk there. Clearly they’ve set out their reasons for that, but every country is treated the same here . In Ireland’s case we welcome it wholeheartedly.”
The Spanish minister for economic affairs Luis Guindos Jurado struck a similar note. "You cannot address structural problems with monetary policy, they have to be addressed with supply side measures," he said. "We implemented structural reforms. We are starting to reap the rewards." Mr Jurado also highlighted the need for banking reform in order to ensure that the money being injected by the ECB flowed through the system.
Financier George Soros, who was also on the panel, said he expected the ECB stimulus to be effective because of its size, but he was critical of the decision to rely so heavily on monetary stimulus which he argued would lead to increased inequality.
“It will benefit the owners of assets and actually wages will remain under pressure through competition and unemployment.”
Mr Schauble responded that the Euro zones ability to use fiscal stimulus was restricted by the rules of the growth and stability pact which puts limits on Government borrowing, “Some member states take European rules seriously,” he said.
“If you want to fight euro sceptics, you have to tell people that agreements made by states are taken seriously,” he added.
Mr Schauble also denied that Germany had been making contingent plans for Greece to exits the euro. "We don't model any exit and are in favour of the euro zone staying together," he said.
Mr Osborne said that whilst there were always arguments for more borrowing that had to be weighed against the fact that many EU states were not on a stable financial footing. The Governor of the Central Bank of Italy, who was also on the panel said that the ECB acted because "the main problem we faced was low inflation, which has an impact on the real economy. It was a real risk".
He added that the ECB had not done anything dramatic and Thursday’s move had to be seen in the context of the bank’s balance sheet shrinking by a third in recent years.
