Former Austrian finance official calls for fiscal consolidation, growth

Former Austrian vice chancellor and finance minister Hannes Androsch told a Sept. 6 Newsmaker audience that a "double strategy of fiscal consolidation and growth" is needed to overcome the global financial crisis.

"We need a long-term, double strategy, combining measures to consolidate public finances which are compatible with long-term, sustainable growth," said Androsch, who is now deputy chairman of the Board of the Austrian Financial Markets Participatory Company and chairman of the Austrian Council for Research and Technology Development.

"Political courage and determination, along with an ability to translate such a policy into reality, are prerequisites," he said.

Europe, Androsch added, "would be better served by a (financial) policy...focused on unity and cooperation, rather than relying on an illusory notion of national sovereignty."

A common monetary policy and a single monetary authority are required for a common currency, he said, but "no less important are a measure of economic and fiscal policy integration and a large degree of fiscal discipline."

He said a successful monetary union requires a common finance minister, a clear limit to debt creation with effective sanctions, a much bigger rescue fund in the order of two to three trillion euros--large enough to keep speculators at bay--and a common debt instrument such as eurobonds.

"The dramatic setbacks on stock markets as well as the adverse economic trends can be taken as an unmistakable warning," he said. "While no one disputes that budgetary consolidation is overdue, or that the restoration of fiscal balance is necessary, these goals cannot be obtained by the imposition of austerity measures in the absence of real economic growth."

What is urgently needed, he said, is "a multi-year, double-sided strategy which combines reductions in public expenditures with measures to promote economic growth."