MNI BRIEF: European Fiscal Board Calls For Debt Sustainability

European Fiscal Board Chair Niels Thygesen called on EU fiscal authorities to show more signs that they are taking debt sustainability more seriously in order to help the European Central Bank in its anti-inflation objective.

Noting at a press briefing that the ECB called on the fiscal authorities to help when inflation was low, Thygesen added that now inflation is high, “They are also hinting that more support for the anti-inflation objective would be helpful.”

Xavier Debrun, EFB Board Member and Adviser in the Belgian National Bank Research Department, said that the decision of the European Commission to extend the Escape Clause from EU fiscal rules to the end of 2023 had not been a good idea in an environment of looming rate rises with its implications for bond yields. (See MNI SOURCES2:ECB Mulls Crisis Tool As Officials Debate Spreads)

“The one-billion-euro question is how far are we ready to allow such a decompression of risk premia - what constitutes speculation vs something that is more fundamental. It’s extremely difficult,” he said.