Debt is the millstone around the neck of all the industrialized world – starting from the Americas to Europe to Japan. The world would be better off with debt discipline – do not leverage more than you can pay in a reasonable time frame.
(Reuters) – ECB policymaker Axel Weber said on Monday that debt-strained euro zone countries must make the most of the breathing space bought by aid measures and warned them the hardest part of the reform process was still ahead.
Weber, who earlier this month said he was stepping down from the Bundesbank and ruled himself out of the running to become the next ECB president, compared the austerity drives by countries like Greece, Ireland, Portugal and Spain to running a marathon.
“The fiscal stabilization measures (of EU/IMF) have bought time. Time that has to be used,” Weber said in a speech to be given at the Nordrhein Westfaelischen Academy of Economics and Arts in Duesseldorf.
“If compared to a marathon the problem countries have made it through perhaps the first 10 or 15 kilometers. In my experience of running these kind of distances I can say that the most painful moments come at a later point in time.”
Weber added that the euro remained a stable currency and said the euro zone debt crisis was down to over-spending by individual countries rather than a fundamental problem with the single currency.
Countries that need to repair their finances need to make the choice of going through the necessary pain or else accept they will have to pay higher borrowing costs on financial markets, he said.
There was also a message to euro zone politicians to bring in tough new debt rules when they finalize details of the region’s post-2013 fiscal safety net in the next couple of months.
“Aid should be tied to a strict consolidation program. In my view it should be seen positively, the aid should only be given after a unanimous decision by those countries providing the help that it should have preference over the rest of the sovereign debt except for IMF credits,” he said.