Shift Emerges in Europe on Focus on Austerity
BRUSSELS — France and Italy, still struggling to meet the euro zone’s tough budget targets, may be gaining support for an effort to relax the rules.
The effort, backed by Socialists in the newly elected European Parliament, could color discussions in Luxembourg on Thursday and Friday, when the bloc’s finance ministers gather for their monthly meetings.
The European Union is finally emerging from a six-year economic crisis that threatened to destroy the euro currency. The crisis set off a fierce debate about whether rigid belt-tightening was the correct course of action — or an impediment to growth.
Left-leaning governments and leaders who are skeptical about that austerity drive are seeking to reopen that debate.
“It looks as if new momentum to once again change the euro zone’s fiscal framework is increasing,” Carsten Brzeski, an economist at ING, wrote in a research note on Wednesday. “It looks as if France and Italy are getting some support.
Mr. Brzeski was referring to comments made Monday by Sigmar Gabriel, the German economy minister and a Socialist member of Chancellor Angela Merkel’s governing coalition. Mr. Gabriel had urged a new emphasis in euro zone rules toward growth rather than austerity.
Speaking in France, Mr. Gabriel said the costs of reforming the economy could be taken into account when calculating states’ deficit levels.
But such “flexibility and time” should be granted only “if the reforms are actually carried out like in Germany,” Mr. Gabriel clarified on Wednesday in comments he made to Bild, a German newspaper, according to a statement from the German Federal Ministry of Economics and Energy.
The most influential member of Ms. Merkel’s government on European Union budget rules is not Mr. Gabriel, but Wolfgang Schäuble, her finance minister. But Mr. Gabriel’s comments appeared to signal a debate opening up on a range of options for adjusting the fiscal rule book in Europe, which could include focusing more on structural rather than nominal deficits; excluding certain investments from the way deficits are calculated; and making countries agree to reforms in exchange for leniency.
Under European Union rules, governments in the 28-member bloc must keep their public deficit below 3 percent of gross domestic product. France has until 2015 to bring its deficit below that level. Italy still faces the task of devising a strategy to prune its huge debt. France is the No. 2 economy in the euro zone, after Germany, and Italy is No. 3.
The Italian prime minister, Matteo Renzi, said last month that he favored offering European Union member states more flexibility on budget rules when his country takes over the rotating presidency of the bloc in July.
But the issue now could become part of the acrimonious negotiations over the next head of the European Commission, the bloc’s main policy making body.
If he does win concessions on fiscal rules — or even the promise of an influential job for an Italian nominee to the commission or another high post — Mr. Renzi could be prepared to throw his support behind Jean-Claude Juncker to become the next president of the commission, according to a European Union diplomat who spoke on the condition of anonymity because the negotiations were incomplete.
That would be a blow to Britain, which steadfastly opposes Mr. Juncker, a former prime minister of Luxembourg, on the grounds that he is too supportive of a federalist Europe.
Despite the austerity discussion, the formal agenda for the finance ministers’ meetings this week is more narrowly drawn.
On Thursday, the 18 ministers from the euro currency union are expected to hear from their newly appointed Greek colleague, Gikas Hardouvelis, on prospects for meeting targets for reforming the Greek economy and as Greece is preparing for talks aimed at relieving some of its debt burden.
Also on Thursday, Christine Lagarde, the managing director of the International Monetary Fund, is expected to present a report on the euro zone economy.
On Friday, ministers are expected to endorse a recommendation by the European Commission for Lithuania to join the single currency zone on Jan. 1, 2015.
Source: nytimes.com