AMSTERDAM (Reuters) - It may be decades before debt levels in the euro zone drop below the EU limit of 60 percent of economic output, but states should still aim to beat that target, European Central Bank policymaker Klaas Knot said on Monday.
The currency bloc needed a strong authority to enforce a reduction of debt levels, Knot, who also heads the Dutch central bank, said.
His downbeat assessment of how long it might be before states again met the standards on debt they had to adhere to when they joined the single currency added to a growing debate about whether those at the sharp end of the debt crisis should be allowed to scale back their austerity programmes.
The International Monetary Fund called last week for leeway on deficit targets for the region’s weaker states, a stance criticized by, among others, Germany.
The limit for public deficits set under European Commission fiscal criteria is 3 percent of gross domestic product, while the limit on sovereign debt is 60 percent.
According to statistics agency Eurostat, debt levels in just five of the 17 euro zone states - Estonia, Luxembourg, Slovenia, Slovakia and Finland - were below the Commission threshold last year.
In the text of a speech prepared for a meeting in Hong Kong, Knot also played the hard-line card, saying euro zone states’ rising debt levels, trade deficits and falling competitiveness had all contributed to the crisis, and EU thresholds on those and other imbalances needed to be enforced more rigorously.
Dutch Prime Minister Mark Rutte will argue for a strong enforcement of the EU debt ratio rule at this week’s summit, he told parliament last week.
Knot said European policymakers and central bankers were doing their best to solve the debt crisis, Knot said.
But “a politically independent European authority that can increasingly intervene in the fiscal policy of countries breaking the agreements” was also essential.
If states achieved their targets, issuing common euro zone bonds could be “a serious option”, Knot said.
“(But) given how remote we still are from the 60 percent debt target, this will likely be a matter of decades rather than years.” (Reporting by Gilbert Kreijger; Editing by John Stonestreet)