German Chancellor Angela Merkel sidestepped French President Francois Hollande’s call to use stimulus measures to counter Europe’s faltering recovery, saying investments need to be carefully considered.
With Germany’s economy slowing, France barely growing and Italy in its third recession since 2008, Hollande arrived at a jobs summit in Milan yesterday saying Germany should “do more to support demand” and that the European Union as a whole should provide 20 billion euros ($25 billion) to support joblessness over six years. Barely four hours later Merkel shied away from any commitment and Hollande fell into line.
“We need to invest, yes, but we need to know where to invest, we need to know where the jobs are,” Merkel said. “We need to know what the professions of the future are. In the whole digital area I see the opportunities for the future.That’s where we should train people.”
Hollande and Italian Prime Minister Matteo Renzi want the European Union to use flexibility in its budget rules in the face of slowing growth and are pushing for the bloc to spend more creating jobs for the one in five young people who are out of work. Currently 6 billion euros has been set aside for the issue in 2014 and 2015.
“I’d like to see more by 2020,” Hollande said. “If Europe can’t provide opportunities for the young, then people will turn away from Europe,” he said.
Rising Deficit
France and Italy are also under pressure as lack of growth distances them from deficit-cutting commitments made earlier in the year.
France now expects its budget deficit to rise this year for the first time in half a decade and doesn’t see the shortfall shrinking to the EU limit of 3 percent of gross domestic product before 2017. Italy has pushed back its plan to achieve a structural balance to next year from this year.
After lobbying for more EU spending on job creation on the way into yesterday’s meeting, Hollande echoed Merkel’s view that existing funds must spent first as he sat alongside her at the press conference afterward.
“I’d like to see more by 2020, I’ve spoken of 20 billion, but before we must see these sums are spent,” he said.
“We need simplification and speeding up of this disbursement.”
Euro-area countries including France and Italy have until Oct. 15 to submit their 2015 budgets to the European Commission under the region’s fiscal rules. The commission will have to then judge their plans and decide whether governments have made sufficient efforts or need to be prodded to do more.
‘A Different World’
The 3 percent limit was “conceived more than 20 years ago, in a different world,” Renzi said. “I respect the decisions of other countries such as France today or Germany in the past with a different government to breach the limit,” adding that Italy will meet its target all the same to bolster its credibility.
France expects a budget shortfall equivalent to 4.4 percent of GDP this year instead of the 3.8 percent previously planned. As concerns about the region’s faltering outlook feed through to markets, with European stocks falling to an eight-week low yesterday and oil prices slumping, Merkel is starting to indicate more fiscal leeway than in the past.
Germany itself is considering lowering it mandatory pension contribution by 0.6 percentage point, which would funnel 6 billion euros into the economy, said Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic Union in the lower house. “We stick to the growth and stability pact, but we also see the flexibilities,” she said in Milan.
bloomberg.com
With Germany’s economy slowing, France barely growing and Italy in its third recession since 2008, Hollande arrived at a jobs summit in Milan yesterday saying Germany should “do more to support demand” and that the European Union as a whole should provide 20 billion euros ($25 billion) to support joblessness over six years. Barely four hours later Merkel shied away from any commitment and Hollande fell into line.
“We need to invest, yes, but we need to know where to invest, we need to know where the jobs are,” Merkel said. “We need to know what the professions of the future are. In the whole digital area I see the opportunities for the future.That’s where we should train people.”
Hollande and Italian Prime Minister Matteo Renzi want the European Union to use flexibility in its budget rules in the face of slowing growth and are pushing for the bloc to spend more creating jobs for the one in five young people who are out of work. Currently 6 billion euros has been set aside for the issue in 2014 and 2015.
“I’d like to see more by 2020,” Hollande said. “If Europe can’t provide opportunities for the young, then people will turn away from Europe,” he said.
Rising Deficit
France and Italy are also under pressure as lack of growth distances them from deficit-cutting commitments made earlier in the year.
France now expects its budget deficit to rise this year for the first time in half a decade and doesn’t see the shortfall shrinking to the EU limit of 3 percent of gross domestic product before 2017. Italy has pushed back its plan to achieve a structural balance to next year from this year.
After lobbying for more EU spending on job creation on the way into yesterday’s meeting, Hollande echoed Merkel’s view that existing funds must spent first as he sat alongside her at the press conference afterward.
“I’d like to see more by 2020, I’ve spoken of 20 billion, but before we must see these sums are spent,” he said.
“We need simplification and speeding up of this disbursement.”
Euro-area countries including France and Italy have until Oct. 15 to submit their 2015 budgets to the European Commission under the region’s fiscal rules. The commission will have to then judge their plans and decide whether governments have made sufficient efforts or need to be prodded to do more.
‘A Different World’
The 3 percent limit was “conceived more than 20 years ago, in a different world,” Renzi said. “I respect the decisions of other countries such as France today or Germany in the past with a different government to breach the limit,” adding that Italy will meet its target all the same to bolster its credibility.
France expects a budget shortfall equivalent to 4.4 percent of GDP this year instead of the 3.8 percent previously planned. As concerns about the region’s faltering outlook feed through to markets, with European stocks falling to an eight-week low yesterday and oil prices slumping, Merkel is starting to indicate more fiscal leeway than in the past.
Germany itself is considering lowering it mandatory pension contribution by 0.6 percentage point, which would funnel 6 billion euros into the economy, said Michael Fuchs, deputy parliamentary leader of Merkel’s Christian Democratic Union in the lower house. “We stick to the growth and stability pact, but we also see the flexibilities,” she said in Milan.
bloomberg.com
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