Eurozone ‘could get more time to meet targets’

Eurozone countries could get more time to meet budget targets as part of a "contract" to carry out reforms, said Jeroen Dijsselbloem, head of the Eurogroup of finance ministers.

The European Commission could play a role in checking whether changes such as relaxing labour market rules were actually being done, in return for more time to make changes such as cutting government debt, Dijsselbloem said.

“I would be very much in favour of that kind of contract,” he told a European Union seminar.

“It could be an interesting deal between the German side of Europe and the Italian side of Europe.”

Germany has led demands for heavily indebted countries to cut spending, while Italy’s prime minister, Matteo Renzi, has sought more emphasis on spurring economic growth to boost government revenue and reduce the relative weight of debt burdens.

Dijsselbloem said such contracts were possible because government finances had already been largely overhauled and economies that were picking up well in the southern eurozone.

“This is the right time to strike this deal, between north and south,” Dijsselbloem said.

The debate over striking a new balance between the pace of fiscal consolidation and the need to boost growth is heating up, as unemployment remains stubbornly high in some eurozone countries.

Dijsselbloem, who is also the finance minister of the Netherlands, said the pace of reforms has to be stepped up with a “lot of work to be done” on boosting competitiveness.

“My biggest worry now is that we are going to end up in a standstill period, and I think we should push ahead on the reform side,” he said.

Dijsselbloem cautioned that yesterday’s actions by the European Central Bank to prod banks into increasing lending to aid growth won’t be enough on their own and that politicians also needed to push ahead with economic reforms.