ECB’s Nowotny Says Austria Has Leeway to Add Fiscal Stimulus

(Bloomberg) --

Austria has the room to heed the European Central Bank’s call for some governments to provide fiscal stimulus as economic growth slows, the country’s outgoing central bank Governor Ewald Nowotny said.

“We have a balanced budget, or even a small surplus,” Nowotny was quoted as saying in an interview with Salzburger Nachrichten published Tuesday. “That’s a positive development, but it can’t be a goal in itself. If it’s economically necessary, this leeway should be used.”

Nowotny, 75, whose term expires Aug. 31, won’t be at the table when the ECB’s Governing Council discusses potential monetary stimulus at next month’s meeting. But the word of the professor and former Social Democratic lawmaker still matters in domestic politics as the Alpine nation heads toward a snap national election on Sept. 29.

The Austrian economy, while deeply tied to that of its bigger northern neighbor Germany, is holding up better. Gross domestic product grew 0.2% in the second quarter as German output shrank, and surveys predict it will grow more than twice as fast this year. The country had its first budget surplus since 1974 last year.

ECB President Mario Draghi said in June that there would be a need to act if the euro-area economy didn’t improve. Since then, the data have shown factory output shrinking, orders dropping and confidence plunging. U.S. President Donald Trump has continued to inflame trade tensions, the U.K. is moving closer to a no-deal Brexit, and the Italian government has collapsed.

©2019 Bloomberg L.P.

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