ECB’s Praet: Budget could help MonPol, especially in times of deep recessions

ECB chief economist Praet crossed the wires last minutes, via Reuters, making a scheduled speech titled "EMU - How much federalism?"

Key Points:

Clear that any politically acceptable euro area fiscal capacity will be modest in size

Pvt/public risk-sharing in Europe underdeveloped

The key question for the economics profession is whether it is possible to remove the link between the stabilisation function and the redistributive function, allowing for a central budget of moderate size to have a meaningful macroeconomic stabilisation effect

If this were possible, such a central budget could help monetary policy, especially in times of deep recessions when nominal interest rates may reach their effective lower bound