ECB's Knot says Italy is paying price for higher deficit
© Reuters. FILE PHOTO: A view shows the board of the European Central Bank building in Frankfurt, Germany, September 14, 2023. REUTERS/Wolfgang Rattay/File PhotoSTRBSKE PLESO, Slovakia - Italy is paying the price for raising its deficit targets via higher borrowing costs, European Central Bank policymaker Klaas Knot said on Friday, telling governments to tighten their purse strings or face"market discipline".
The ECB can buy a country's bonds if it thinks it's coming under undue market pressure, as it did last year and at the height of the pandemic in 2020. Knot was the first ECB policymaker to directly address the Italian woes but he said that undue fiscal largesse, which makes it harder for the ECB to bring down inflation, extended to other countries too.
Speaking at the same conference, his Croatian peer and fellow hawk Boris Vujcic joined his call for fiscal discipline after the large deficits of the pandemic years.
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