EU exec to move spotlight from austerity to reforms on Wed
European Commission expected to say that fiscal consolidation should continue but at a slower pace now that confidence in the euro is restored
The European Commission will further shift the EU’s policy focus from austerity to structural reforms to revive growth when it presents economic recommendations for each member state on Wednesday, officials said.
In its annual assessment as guardian of the EU’s budget rules, the Commission will say that while fiscal consolidation should continue, its pace can be slower now that a degree of investor confidence in the euro has been restored.
Because highly indebted governments cannot afford to kickstart growth through public spending, they must reform the way their economies are run - by making labour markets more flexible or by opening up product and services markets.
“The main message will be that the emphasis is shifting to structural reforms from austerity,” one senior EU official said.
The recommendations, once approved by EU leaders at a summit in late June, will become binding and are expected to influence how national budgets are drafted for next year and onwards.
The 17 countries that share the euro will have halved the pace of budget consolidation this year compared to last year, as the overall budget deficit of the euro zone fell by 1.5 per cent of GDP last year but will only shrink a further 0.75 per cent this year, the European Commission forecast this month.
The United States plan to reduce their budget deficit by 2 per cent of GDP this year against last year. Unless policies change the overall euro zone consolidation will be only 0.1 per cent of GDP next year, the Commision said, against 1 per cent in the US