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European Central Bank President Mario Draghi and German Finance Minister Wolfgang Schaeuble differed over what further steps to take if the euro-area economy keeps weakening as the region came under renewed foreign pressure to revive growth.
As the International Monetary Fund’s annual meeting in Washington began, Draghi pledged anew to loosen monetary policy more if needed and called on those governments with the room to ease fiscal policy to do so. By contrast, Schaeuble warned against U.S.-style quantitative easing and urged continued budgetary discipline.
The differences demonstrate the lack of a common front in euro-area policy making as its economy continues to deteriorate and the IMF estimates there is as much as a 40 percent risk of a third recession since 2008. Finance ministers and central bankers from the Group of 20 economies meet today, and Europe’s economic performance will be among the issues discussed, officials said.
“There is a concern about a deflationary spiral, we aren’t predicting it, but we want to preclude it,” Canadian Finance Minister Joe Oliver told reporters. “No one is saying it’s a piece of cake, far from it.”
That is one of the questions at the heart of the debate over what needs to be done to push the eurozone out of its lengthening period of very low inflation and anemic growth. And it got an airing Thursday during a panel at the annual meetings of the International Monetary Fund.
On one side of the debate sat German Finance Minister Wolfgang Schaeuble on Thursday, a defender of the eurozone’s current strategy, which is to continue to cut budget deficits while pursuing structural changes to spur growth, such as altering labor-market laws to make it easier to hire and fire, and eliminating damaging distinctions between older workers with job security and younger people without jobs, or if they have them, very little security.
As the eurozone economy has weakened in recent months, that strategy has been questioned within and without the currency area. But in a panel discussion on the currency area’s predicament, Mr. Schaeuble was unmoved.
“European governments have to stick to structural reforms and the budget rules,” he said.