Europe recovery fund needs to be temporary - Knot

FILE PHOTO: European Central Bank (ECB) board member Klaas Knot appears at a Dutch parliamentary hearing in The Hague, Netherlands September 23, 2019 REUTERS/Eva Plevier

FRANKFURT (Reuters) - The European Union’s 750 billion euro (676.3 billion pounds) recovery fund to kickstart growth after the pandemic must be temporary and complementary risk sharing through private markets is needed, European Central Bank policymaker Klaas Knot said on Tuesday.

“A Europe that is kept together through large transfers of public funds is vulnerable from a political perspective,” Knot, the Dutch central bank governor said in a speech. “The need for complementary risk sharing through private markets remains high.”

Europe has agreed in principle on the recover fund but leaders have bickered over the detail, raising the prospect of a delay.

Knot added that banks are bound to take a hit from the crisis as their loan books deteriorate, making them difficult to extend credit. That makes additional funding mechanism necessary, a key argument to kickstat a stalled discussion on Europe’s capital market union.

Reporting by Balazs Koranyi; Editing by Francesco Canepa