Finance ministers of the eurozone feel that the euro area fiscal stance should not be expansionist, in opposition to the European Commission’s recommendations for a budget policy that gently aims at a spending increase of 0.5% of GDP (see EUROPE 11669).
‘On the basis of Commission analysis, in July, the Eurogroup said that the broadly neutral aggregate fiscal stance in 2017 strikes an appropriate balance. The Eurogroup today underlines the importance to strike an appropriate balance between the need to ensure sustainability and the need to support investment to strengthen the fragile recovery,’ explained the nineteen ministers in a press release on Monday 5 December.
Eurogroup chair, Jeroen Dijsselbloem, said that the ministers had not decided on a figure as a target. Germany, Finland and Slovakia are among the member states most hostile to an expansionist policy. Economic and Monetary Affairs Commissioner Pierre Moscovici said it was ‘more important’ for the Eurogroup to endorse the European Commission’s economic reasoning than a specific target.
Dijsselbloem said only Germany, the Netherlands and Luxembourg, whose performance outstrips the targets set for the medium-term, currently have sufficient budgetary room for manoeuvre to be able to spend more. In a statement, the eurozone finance ministers admit that these three countries could make use of their favourable budgetary position to further boost domestic demand and growth potential in line with their individual circumstances.
In budget surplus since 2015, Germany will record a surplus of 0.6% of GDP in 2016 and 0.4% in 2017. Luxembourg is expected to have a surplus of 1.3% of GDP in 2016 and be in budget equilibrium in 2017. The Netherlands’ public deficit will be reduced from -0.8% to -0.3% of GDP. Dijsselbloem said that in his country, they were spending more and cutting the deficit at the same time. Dijsselbloem is also Dutch finance minister.
He pointed out the paradox that the countries with the means to carry out a more expansionist budget policy are not necessarily those that need one the most. He added that no other decisions on boosting convergence of budgetary policies in the eurozone could be taken until policy integration steps have been achieved.
In the spring of 2017, the European Commission will unveil a White Paper on the future of economic and monetary union, which will examine measures recommended in the five presidents’ report (see EUROPE 11340). (Original version in French by Mathieu Bion)