LONDON -(Dow Jones)- The euro zone would be better served by budget rules that encourage expansionary policies during a downturn rather than the "asymmetric" fiscal compact agreed by European leaders, Bank of England policy maker Adam Posen said Tuesday.
Posen, who was speaking in a personal capacity, told a conference organized by the London School of Economics and the Centre for European Reform that Europe's new fiscal compact is too focused on austerity.
"Discipline doesn't have to be inflexible. It can be countercyclical," Posen said, referring to the deployment of expansionary policies in a downturn and greater budget discipline during booms.
Posen added a soon-to-be-published analysis by BOE staff shows fiscal consolidations are more successful when preceded by expansionary monetary policies.
"If you look back at the history of fiscal consolidation efforts, the more aggressive your monetary accommodation at the start the more likely those consolidation efforts are to succeed," he said.
-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; jason.douglas@dowjones.com
(END) Dow Jones Newswires
April 17, 2012 07:28 ET (11:28 GMT)
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