By Jason Douglas
Bank of England Gov. Mark Carney on Wednesday urged eurozone
officials to foster stronger growth in the currency union by
deepening the fiscal ties between member states.
His unusually forthright remarks underscore the frustration of
British policy makers at the slow pace of reform in the U.K.'s
biggest export market.
During a speech in Dublin honoring former Canadian Finance
Minister Jim Flaherty, who died last year, Mr Carney said European
monetary union wouldn't be complete until member countries build
mechanisms to share fiscal risks.
Mr. Carney, who is also a Canadian, served alongside Mr.
Flaherty as governor of Canada's central bank until joining the BOE
in 2013.
Successful currency unions such as Canada, the U.S. and the U.K.
have arrangements in place to channel public funds to areas of
hardship from well-off regions whenever needed, he said. The
eurozone doesn't.
"Europe's leaders do not currently foresee fiscal union as part
of monetary union. Such timidity has costs," said Mr. Carney,
according to a text of his speech.
His remarks come at a fraught time for the eurozone.
Sunday's election victory in Greece of the antiausterity Syriza
party threatens to reignite the region's debt crisis and undermine
a fitful global recovery.
The European Central Bank, faced with the threat of a prolonged
period of falling prices in the 19-nation currency area, this month
unveiled a huge program of asset purchases to spur growth and stoke
inflation.
The ECB's actions were "timely and welcome," Mr. Carney said.
But he warned that feeble growth risks increasing the debt burden
of deeply indebted nations and that the "fear of stagnation" is
holding back spending and investment. He said efforts to create a
banking and capital markets union in the eurozone to channel
private-sector savings easily across borders are welcome but don't
go far enough.
"For complete solutions to both current and potential future
problems the sharing of fiscal risks is required," Mr. Carney said.
Options for sharing such risks range from outright cash transfers
to struggling regions from the union's prosperous core to a
eurozone-wide employment insurance program, he said. "Without this
fiscal risk-sharing, the eurozone finds itself in an odd
position."
Mr. Carney's remarks highlight British unease at the eurozone's
ongoing economic malaise, which officials blame for stymieing U.K.
exports and hammering business and consumer confidence. After a
painful recession in 2008 and 2009, followed by several years of
weak growth, the U.K. grew 2.6% in 2014, according to official
data, its fastest pace in seven years.
Mr. Carney didn't discuss the outlook for U.K. monetary policy
at length in his remarks, beyond reiterating that with inflation
subdued, future increases in interest rates are likely to be
gradual and limited.
Write to Jason Douglas at jason.douglas@wsj.com