VIENNA (Reuters) - Countries receiving bailout funds from the European Union should also relinquish some sovereignty in budget-setting to the EU, European Central Bank Governing Council member Ewald Nowotny said on Thursday.
Nowotny, who heads the Austrian National Bank, also said in a speech at a central bank conference that budget consolidation programs need to be combined with measures boosting economic growth.
“A political union needs more than a tight set of rules and restrictions, namely central decision-making in fiscal policy, or, at least a strong say for Community institutions in recipient countries’ budget policies,” Nowotny said.
Nowotny also indicated that the countries receiving aid - Greece, Ireland and Portugal - need to stay the course.
“I do not see a credible alternative to the procedures developed in the context of specific aid programs,” he said.
At the same time, he warned against setting too ambitious goals for austerity programs, saying that revising them later could hit investor confidence. But they must also give room for growth.
“Consolidation programs must be seen in the context of growth prospects,” Nowotny said. “It is possible and necessary to combine consolidation and growth strategies.”
Reporting by Sakari Suoninen and Michael Shields