FRANKFURT (Reuters) - Leaving the path of tough reforms and raise spending instead will not solve the debt crisis and will only shift the problems to the future, European Central Bank Executive Board member Joerg Asmussen said on Wednesday.
There is growing frustration among citizens about government spending cuts, labour market reforms and higher taxes to get countries’ budgets under control, and the Cypriot parliament on Tuesday voted down the euro zone’s plan for a bailout.
But Asmussen said there was no better way out of the debt crisis than reining in spending now, because higher borrowing today meant higher interest payments tomorrow, which had to be paid off by future generations.
“Let me be clear: I am also very concerned by the high level of unemployment. I would also like to see stronger growth. But before proposing to change course, we need to think through the consequences,” Asmussen told an audience at a conference under the title “Women in European business”.
“It is an illusion to think that more debt is the answer to this debt crisis. Recent research has shown that high public debt levels in the euro area hamper growth, with a serious negative effect starting when debt exceeds 90 percent of GDP.”
Reporting by Eva Kuehnen and Sakari Suoninen