Germany proposes cost-neutral growth
BERLIN, Germany -— GERMAN Chancellor Angela Merkel’s government is proposing a plan to encourage growth in Europe that features structural reforms and a more efficient use of existing EU funds — but no fresh stimulus money.
Merkel has embraced the idea of a separate growth initiative alongside the EU’s new treaty enshrining fiscal discipline in order to help secure support from opposition politicians that her centre-right coalition needs to get the pact passed in Parliament.
The coalition’s draft proposal also calls for the European Investment Bank’s capital to be increased by (euro) 10 billion ($1.1 trillion) to boost its overall lending capacity for projects fostering growth by about (euro) 80 billion.
But the largely cost-neutral proposal falls short of the German opposition’s demands, which include a programme to fight high unemployment in southern Europe’s struggling nations and a new financial transaction tax.
“All experience shows: sustainable growth cannot be achieved through higher deficits, government meddling, nor through an expansive monetary policy,” the government coalition states in its draft, stressing the need for reforming the economy instead.
“Experience in Germany shows: Courageous structural labour market reforms are essential to create more jobs and increase the economy’s flexibility,” it read.
Led by Merkel, 25 EU nations last year agreed to the treaty which limits the countries’ ability to pile up more debt, binding them to strict fiscal and deficit targets as a way to stabilise the continent’s finances and regain investors’ trust.
But the political tide in Europe has since shifted away from austerity measures to calls for a growth initiative as the bloc is on the brink of a recession, with southern European nations particularly hard hit.