Newspaper article International New York Times

Fresh Push to Ease Up on Europe's Budget Rules ; France and Italy, Laggards on Fiscal Targets, Press for Growth over Austerity

Newspaper article International New York Times

Fresh Push to Ease Up on Europe's Budget Rules ; France and Italy, Laggards on Fiscal Targets, Press for Growth over Austerity

Article excerpt

Left-leaning governments and leaders who are skeptical about austerity efforts are hoping to revisit the European Union's policies.

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 push is occurring as the European Union emerges from a six- year economic crisis that threatened to destroy the euro. The crisis triggered 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 should 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 Ministry of Economics.

The most influential member of Ms. Merkel's government on European Union budget rules is not Mr. Gabriel, but Wolfgang Schauble, her finance minister. But Mr. Gabriel's comments appeared to signal debate opening up on range of options for tweaking the fiscal rulebook 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 sign reform "contracts" in exchange for leniency. …

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