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Euro zone fiscal response to crisis inadequate: ECB’s Panetta

FRANKFURT (Reuters) – The euro zone’s fiscal response to the coronavirus crisis has been inadequate so far and threatens the single market, European Central Bank board member Fabio Panetta said in an editorial published by Politico.

Budget action should be proportionate to the magnitude of the shock, should not aggravate fragmentation stemming from differences in initial fiscal positions and should not skew the playing field within the European single market, Panetta said on Tuesday.

“The fiscal response of European countries has thus far been inconsistent with these principles,” Panetta, formerly senior deputy governor of the Bank of Italy, added.

“The threat to the single market is clear: uneven fiscal support implies that a firm’s location, rather than its business model, will be the decisive factor in determining whether it survives this crisis.”

(Reporting by Balazs Koranyi; editing by John Stonestreet)