Euro zone countries should start gradually withdrawing discretionary fiscal support from the economy in 2011, the chairman of euro zone finance ministers, Jean-Claude Juncker, said today.
EU countries have spent hundreds of billions of euros in measures to fight the worst economic crisis in decades, but with a recovery in sight and debt mounting quickly, the 27-nation bloc wants to prepare a plan for withdrawing the aid.
"We took exceptional measures that are not sustainable in the medium- and long-term," Mr Juncker told the European Parliament's economic and monetary affairs committee.
"I don't think 2010 will be year we start using our exit strategies. 2011 will be the year in which we will gradually start to implement exit strategies," he said.
European Central Bank Governing Council member Vitor Constancio also said budget stimulus should not be removed yet.
"It is premature to speak of the end of the crisis," he said in Lisbon. "There is major uncertainty about (the) global recovery's magnitude and sustainability," Mr Constancio added.
Mr Juncker told the committee the euro zone economy was stabilising after the crisis, but the situation remained fragile and outlook uncertain.
He forecast the economies of 16 countries using the euro would grow 0.3-0.5 per cent next year after a 4 per cent contraction this year.
"What we see today is that the economic situation stabilised by and large. Nevertheless, it is wise to be prudent," he told the parliamentary committee.
EU leaders agreed earlier this month to keep fiscal stimulus until the recovery was firm. The economy is likely to have already started growing in the third quarter and will probably expand, albeit slowly, in coming quarters.
The European Commission believes the EU must start major budget deficit cuts in 2011 to prevent debt spiralling out of control after the huge extra government spending.
Euro zone and EU finance ministers will discuss the timing of the exit strategy at a meeting on Thursday in Gothenburg, Sweden.
Reuters