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New ECB chief Lagarde criticises Germany for low spending

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Eurozone countries running budgetary surpluses such as Germany should increase spending to shore up slowing growth in the eurozone, incoming European Central Bank chief Christine Lagarde said Wednesday.

[PARIS] Eurozone countries running budgetary surpluses such as Germany should increase spending to shore up slowing growth in the eurozone, incoming European Central Bank chief Christine Lagarde said Wednesday.

Ms Lagarde told France's RTL radio that whereas eurozone members had successfully coordinated their fiscal policies to save the bloc during the 2008/2009 sovereign debt crisis, "since then the countries which have budgetary space have not really made the necessary efforts."

She said that "countries with chronic budget surpluses like the Netherlands and Germany and a few others in the world" should loosen their purse strings to help overcome the "current imbalances".

The former IMF chief, who will take over from outgoing ECB head Mario Draghi on Friday, called on those countries to increase spending in infrastructure, education and innovation.

She also echoed French President Emmanuel Macron's repeated calls for greater budgetary solidarity among the 19 countries that share the euro currency, calls that received a cool response in Germany, the Netherlands and other northern European countries.

"We share a currency but we're not sharing much in terms of budgetary policy at the moment," she said.

She said it was "regrettable" that the eurozone did not yet have a common budget.

Eurozone finance ministers earlier this month agreed on the basic terms of a small eurozone budget that falls short of Mr Macron's ambitious goals.

It has yet to be approved by eurozone leaders.

Inspired by the bailout programmes for Greece, Portugal and Ireland, the 17-billion-euro tool only helps governments that deliver politically difficult reforms, such as loosening hiring and firing rules, slashing pensions or privatising state companies.

AFP

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