The time is ripe for a reform of the Stability and Growth Pact, Bank of Greece governor Yannis Stournaras told the 22nd Rencontres Economiques held in Aix-en-Provence in France. The Greek central banker recommended that the Recovery and Resilience Facility should be transformed into a permanent mechanism linking fiscal policy at the heart of the Eurozone with new rules in order to avoid the moral hazanrd of relaxing fiscal stability on a national level.
“Our goals here must be to ensure sustainability of public debt for all member-states, achieving anti-cyclical fiscal policy and creating a central fiscal tool for all Eurozone countries that will be activated to deal with symmetric turmoil (pandemic, war impact, etc),” Stournaras said, adding that despite progress made since the fiscal crisis era, there were still reforms that could not move forward, such as creating a pan-European deposit guarantee scheme and completing the framework of bank crises management. The Greek central banker noted that an incomplete banking and fiscal union in times of crisis and uncertainty like the one currently faced are creating risks of financial fragmentation in the Eurozone. Stournaras said it was very important to create a full economic and monetary union. Referring to bank supervision, he recommended that the supervision of less systemic banks should converge with that of systemic banks.