September 17, 2019 / 5:16 PM / a month ago

ECB's Villeroy urges Germany, Netherlands to tap 'fiscal leeway'

FILE PHOTO: Governor of the Bank of France Francois Villeroy de Galhau delivers a speech to open a conference entitled "Bretton Woods: 75 years later" in Paris, France, July 16, 2019. REUTERS/Philippe Wojazer

LONDON (Reuters) - Euro zone countries should consider easing taxes or boosting investment to support growth if their finances allow, ECB policymaker Francois Villeroy de Galhau said on Tuesday, singling out Germany and the Netherlands.

In the face of slowing euro zone growth, the European Central Bank cut interest rates on Thursday deeper into negative territory and promised bond purchases with no end-date.

In a speech in London, Villeroy said governments also had a role to play in kick-starting a recovery, echoing an appeal from ECB chief Mario Draghi last week.

While there was still a need for growth-boosting national reform programs, he said: “the euro area should now exploit its fiscal leeway – for instance in Germany and the Netherlands – to support growth.”

“It is essential to choose qualitative expenditure (starting with investment) or tax cuts that have a strong impact on long-term growth,” Villeroy said in a speech at the London School of Economics.

Despite the urgency of reviving euro zone growth, Villeroy said the bloc should not lose focus on other priorities like improving access to finance for small and mid-sized firms and venture capital or increasing the international role of the euro.

Reporting by Marc Jones, writing by Leigh Thomas, Editing by Christian Lowe

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