Europe’s largest economy, Germany, slashed its growth forecast and France faces growing calls to cut spending, amid fears Europe may sink back into recession. EU finance ministers are calling for stimulus spending to revive the region’s sluggish growth.
European Union finance ministers wrapped up two days of talks in Luxembourg, calling for greater investment to boost the bloc’s struggling economies. Economy Minister Pier Carlo Padoan of Italy, which holds the bloc’s rotating presidency, spoke to reporters after the meeting.
“There is a broad agreement … on the fact that investment is one of the three pillars of the growth strategy of the European Union,” said Padoan. “The other two being structural reforms and growth-friendly fiscal consolidation … and structural reforms, by improving the business environment, is a main way forward in generating profitable projects by facilitating investment.”
The 18-member eurozone region, which only emerged from recession last year, risks being dragged down again, partly because of the economic problems of heavyweights France and Germany.
On Tuesday, the German government sharply cut its growth forecasts for this year and next – down to 1.2 percent in 2014, compared to its earlier estimate of 1.8 percent. It blamed troubles overseas for slowing its export-driven output.
German Economy Minister Sigmar Gabriel said in Berlin that the country’s economy “is currently in difficult waters in terms of foreign trade.”
But he rejected calls by some other eurozone nations that Germany abandon its push for government spending austerity. He said “more debts in Germany do not create growth in Italy, France, Spain or Greece.”
France’s economy is also struggling and it faces record unemployment. But budget conscious Germany is at odds with France about how to stimulate growth. On Wednesday, the French government presents its 2015 draft budget to European officials, who warn they may reject it since it foresees France missing the block’s three-percent budget deficit target for a second time.
Even France’s new Nobel Economics laureate, Jean Tirole, is calling for tougher measures to get the country back on its feet, including these remarks on France 24 news channel.
“France has a lot of assets. And in a sense it is a little bit sad that France is in trouble right now. France has to undergo some reforms,” said Tirole. “One of them being labor market reforms. We have not succeeded in France to undertake the labor market reforms that are similar to Germany and Scandinavia and so on. We have not succeeded also in downsizing the state.”
European finance ministers also agreed on broad new measures to crack down on tax evasion that costs Europe an estimated $1.26 trillion a year.
The International Monetary Fund last week cut its forecast for eurozone growth — to eight-tenths of a percent for this year and 1.1 percent in 2015. The eurozone has already sustained two recessions in recent years.
(Photo: Vangelis Thomaidis)