ECB's Noyer unconvinced of the need for negative rates

(Source: Reuters)

*Noyer unconvinced of the need for negative interest rates
*Noyer says that France must tackle spending, not raise taxes
*Noyer says that negative rates are very complicated

The European Central Bank's Christian Noyer has take a swipe at French fiscal policy. He stressed that France must now focus on reducing budget spending, with no room to raise taxes furhther.

Frenchman Noyer is seen to be a close friend of socialist President Francois Hollande, making these comments particularly biting. Noyer also said that raising the French retirement age seems "inevitable".

The government now needs to concentrate on public spending to meet its target, as the tax burden has reached a very high level and any further increases in employer contributions would lead to a deterioration in both activity and employment.

He also slammed the European Comissions' proposed transaction tax, saying that it will raise no funds, and could penalise savers. The official also warned that the tax, planned by 11 EU countries, could hinder the monetary policy transmission mechanism.

Noyer continued by discussing the "very, very complicated" issue of negative deposit rates, saying that no countries have tried these and that the effects would be very different in smaller countries. He clarified later in the day, saying that he was unconvinced of the need for negative rates.

There are suspicions that the transaction tax could be delayed by as much as a year:

German government officials are playing down prospects for introducing a financial transaction tax in the near future after a member of the opposition Social Democrats (SPD) broke ranks and described the project as “rubbish”.


[Finance ministry spokesman Martin] Kotthaus said it would be unrealistic to introduce the tax quickly and no revenues from the tax were planned in the 2014 budget. Until now 2014 has been cited as the start date.

(Full article)