ECB's Praet Says Euro Zone Must Push On With Fiscal Integration

(Bloomberg) -- Go inside the global economy with Stephanie Flanders in her new podcast, Stephanomics. Subscribe via Pocket Cast or iTunes.

The long-term solution to doubts about the euro’s survival “most likely” involves deeper fiscal integration, according to European Central Bank chief economist Peter Praet.

“It’s important that the debate is moving forward in this area,” the Executive Board member said in a video address at a conference on the future of Europe in Frankfurt on Friday. Short-term ambitions are “relatively limited” but “actions were needed today to rebuild trust in EMU.”

A decade after the global financial crisis, rising support for anti-establishment political parties is likely to be reflected in European Parliament elections this month in a challenge to the continent’s plans for ever-closer union.

Praet also urged the completion of a regional banking union, saying it’s critical for stability and risk-sharing. A fully-fledged framework for bank resolution and deposit insurance “cannot be delayed any longer” as it would lead to greater private risk-sharing, which would “lessen the need for fiscal risk-sharing,” he said.

On Brexit, Praet said the U.K.’s planned departure from the European Union has highlighted “the pros of membership and the cons of being outside.”

“It is now established that leaving the EU presents a trade-off,” he said. “Countries either have to follow the rules they could once set; or they have to accept a diminished level of market access, and ultimately lower welfare for their people.”

©2019 Bloomberg L.P.