France and Italy will keep pressure on Germany this week to use government money to revive the eurozone’s stagnating economy but, in a sign of inertia, a promised list of projects to create growth will not be ready until December.
European finance ministers take the argument to Luxembourg for two days of talks following last week’s International Monetary Fund meetings in Washington. There, German finance minister Wolfgang Schaeuble ruled out “writing cheques” for the eurozone.
One compromise is an infrastructure investment fund of public and private money, although even the first draft of a list of potential projects will not be ready until December, according to a document prepared for the Luxembourg meeting.
The eurozone’s sinking fortunes are raising alarm among global policymakers, who fear the bloc is again dragging on the world economy just two years after its last crisis, and say the continued strict focus on budget rigour is misplaced.
EU officials are nevertheless seeking last-minute changes to the French and Italian budgets for 2015 to reduce their fiscal deficits, sources have said — a sign of the difficult balancing act underway in the eurozone.
Ministers will also hear from EU and IMF inspectors on Greece’s plans to exit its financial rescue programme in 2015, a year ahead of schedule.
There are signs that a poor run of German data may be softening chancellor Angela Merkel’s opposition to public spending. Merkel says her government is exploring ways to encourage more investment in the German economy, which contracted by 0.2% in the second quarter and could weaken further going into 2015.
The German government will cut its economic growth forecasts for 2014 and 2015 next week, sources have told Reuters, while Britain is also concerned about the impact eurozone stagnation is having on its recovery.
EU finance ministers are pinning their immediate hopes on a plan by the European Commission and the European Investment Bank to create a pipeline of projects to boost business dynamism and growth potential, according to the EU document seen by Reuters. The EU hopes that small amounts of money from the EIB and the EU’s budget could be seed financing. Investment in the 28-country bloc has fallen by about 20% since 2008, according to the European Central Bank.
However, there are few details other than that ministers are eager to bring in as much private investment as possible and complement a €300bn investment programme proposed by incoming Commission president Jean-Claude Juncker.
Jyrki Katainen, who is set to take over as the European Commission’s official responsible for jobs and growth next month, told Reuters that energy, transport and broadband Internet were priorities. Despite an urgent need to tackle near record unemployment, concerns about rushing into projects that will not have a clear economic pay-off mean efforts are proceeding cautiously.
A list of projects and ways to finance them will be presented in December, delaying a pledge to have something ready for this week’s meeting.
France and Italy, the eurozone’s second and third largest economies respectively, are relying on Germany to increase public spending because they are unable to as the European Commission deems their debt and deficits to be too high.