PwC urges Duisenberg to target growth

Date: 04/10/01

Wim Duisenberg should follow the example of US counterpart Alan Greenspan if the EU economy is to shrug off last month's terrorist attacks, according to accounting giant PricewaterhouseCoopers.

Its chief economist, Rosemary Radcliffe, said the ECB has focused too heavily on inflation in its management of monetary policy and that it should now target growth. She urged the ECB to cut interest rates aggressively to ensure the stability and growth pact - which bans budget deficits above 3 of GDP and says countries must aim for balanced budgets in the medium term - does not become a strait-jacket. "In my personal judgement, the ECB has focused heavily on inflation and not growth - to the detriment of the European economy. If the ECB can take the same approach that the Fed has taken [cutting rates to the lowest levels in decades], then we can keep within the terms of the stability pact," she said.

PwC is forecasting EU growth in 2001 and 2002 to be around 1.75 - far below recent estimates of between 2-2.5. Finance ministers discussed loosening budgets at last month's informal meeting in Liège, but governments agreed that the stability pact's terms must be met.

Wim Duisenberg should follow the example of US counterpart Alan Greenspan if the EU economy is to shrug off the recent terrorist attacks, according to accounting giant PricewaterhouseCoopers.