Both policymakers acknowledged that financial stresses in the Eurozone were easing but they emphasized that the crisis was not over yet and that all should be done to restore financial stability in the region. They urged EU officials to boost the firewall, strengthen the banking system and move towards a tighter fiscal union.
Bernanke described the adverse effects the EU crisis had on the US economy. He stressed that the Fed was in frequent contact with EU officials and was prepared to act in case of any aggravation of the situation in the region. “We are particularly focused on protecting US financial institutions, businesses, and consumers from adverse financial and economic developments in Europe,” he assured. Bernanke also said that the Fed had no plans of purchasing European government debt.
Geithner likened the situation of the US to that of Europe saying that that although the former also felt the weight of the debt crisis, it had much more time to tackle its problems than the latter. The Treasury Secretary expressed his belief that the EU had the resources necessary to stabilize the financial situation in the area. He also repeated his call for a balanced approach to the introduction of severe austerity measures, which might result in stifling growth.
UK Budget: Osborne announces tax and spending cuts
On Wednesday the Chancellor of the Exchequer George Osborne announced the UK annual budget. He assured that tough austerity measures will be implemented despite calls to ease the program of reductions, as it is crucial to retain bond market confidence and UK's current AAA credit rating.
"Britain is going to earn its way in the world. There is no other road to recovery," the Chancellor said, adding that "this budget supports working families and helps those looking for work. It unashamedly backs business. And it is on the side of aspiration: those who want to do better for themselves and for their families."
His plan involves simplifying the British tax system in order to reduce deficit, which almost doubled in February. The chancellor proposed such solutions as the reduction of the top rate of the income tax from 50% to 45% in April 2013. He also cut corporation tax which will decrease to 24% in April this year and then to 22% by 2014.
Osborne also pledged tax allowances for the creative sector and more support for the pharmaceutical, aerospace and science industries, as well as for businesses which want to export their products.
Germany presents 2013 draft budget
The German government unveiled its 2013 budget project on Wednesday, in which it pushes for a quicker consolidation of finances than initially established. According to the plan presented by Finance Minister Wolfgang Schaeuble, the country will manage to cut its deficit to 0.35% of GDP already by 2014.
Germany intends to reduce net borrowing in 2013 to 19.6 billion euros from the previously planned 24.9 billion euros and from 34.8 billion euros established for 2012.
Schaeuble announced that the draft “embodies policies that will foster economic growth and our commitments to cut debt.” This way Germany wants to show the rest of the EU how serious it is about fiscal discipline and that other Member States should follow its example by introducing tough reforms.
