Mark Carney slams Eurozone austerity days after Syriza win

Bank of England governor's attack seen as call for Berlin to accept Greek demands to relax austerity

Mark Carney
(Image credit: 2013 AFP)

Bank of England governor Mark Carney has launched a withering attack on the Eurozone's pursuit of austerity, just days after the anti-austerity Syriza party surged to victory in the Greek election.

He warned that the Eurozone faced "another lost decade" unless member states pooled their resources and progressed towards a fiscal union.

Although he mentioned no countries by name, his comments were described by The Times as a "barely coded call" for Berlin to accept Greek demands to relax austerity.

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"It is difficult to avoid the conclusion that, if the eurozone were a country, fiscal policy would be substantially more supportive," the governor told an audience in Dublin. "However, it is tighter than in the UK, even though Europe still lacks other effective risk-sharing mechanisms and is relatively inflexible."

Carney warned that the European monetary union "will not be complete until it builds mechanisms to share fiscal sovereignty".

His intervention will "infuriate" German Chancellor Angela Merkel, who is battling to keep Greece in the euro without provoking demands for concessions from other struggling nations, says the Times.

BBC economics editor Robert Peston says Carney is in effect saying that Germany ought to do more to support the likes of Italy, Spain and France.

While there is "nothing new" in his argument, the timing of the intervention is "striking", says Peston. It comes days after the European Central Bank announced a massive programme of quantitative easing to head off deflation, and as eurozone countries led by Germany "baulk at providing further financial help to Greece", he says.

Calls for greater federalism and risk-sharing have led to a rise in nationalist parties, such as the True Finns in Finland and the National Front in France.

But as Greece's new government tries to renegotiate its debts, Carney said that others in the euro area are also "sinking deeper" into debt.

"Europe's leaders do not currently foresee fiscal union as part of monetary union," he says. "Such timidity has costs."

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