Tags: EU | Europe | Financial | Crisis

EU: Some Nations Should Spend as Others Make Cuts

Tuesday, 18 May 2010 11:25 AM

Some European governments must slash debt sharply but others should keep spending to boost growth across the 27-nation bloc, a top EU official urged Tuesday, as the region tries to solve a debt crisis by imposing budget cuts that risk triggering a new recession.

European Union Economy Commissioner Olli Rehn said financially troubled Greece, Spain and Portugal must push through harsh austerity programs now. But he warned that "efforts should be different according to the fiscal situation."

Countries running relatively lower deficits could "maintain less restrictive fiscal stances for the sake of growth in Europe as a whole," Rehn told reporters.

Investors and investors fear the austerity measures to deal with the debt crisis will be hurt economic growth for years by cutting off government stimulus to the economy. Fears of an immediate default have been eased by a 750 billion euro ($1 trillion) rescue package that is to be made available to governments if they need it. But for the long term, many wonder whether some countries will face growth so weak they will have trouble paying off debts.

Spain acknowledged Tuesday that new austerity measures demanded by other EU nations will curb its economic growth next year. Finance Minister Elena Salgado budget cuts will shave a "few decimal points" off the country's 2011 economic forecast for 1.8 percent growth.

Spain and Portugal drafted new spending reductions last week — under pressure from Germany and others who backed the "shock and awe" financial backstop — to calm market worries that they could follow Greece in requiring an EU bailout to avoid defaulting on debt.

Germany — which is paying the largest chunk of both the rescue package and a 110 billion euro bailout for Greece — has taken the position that it's time for austerity, and has made budget cuts a precondition for any financial help.

German Finance Minister Wolfgang Schaeuble said EU governments had to send a "necessary signal of confidence to markets" by pushing on with budget cuts and accelerate economy reforms that could eventually aid growth — and reduce the risk of countries seeking a bailout.

Dutch Finance Minister Jan-Kees de Jager said there is now "a broad consensus that the time of stimulating growth through public spending is over and what is required now is significant consolidation" of national budgets using austerity programs.

"Many countries see a now-or-never moment," he told reporters.

EU officials also see it as the time to push for longer-term changes to widely ignored budget rules that are supposed to limit debt and deficits in the 16 countries that use the euro. Government talks start Friday on what new rules or sanctions the EU should introduce. Germany has called for the ultimate punishment of ejecting a country from the euro if it persistently ignores the rules.

Rehn also said it was "high time" to reinforce economic governance in the region, pressing EU nations to adopt his suggested tighter budget rules which he said could be put in place rapidly — unlike Germany's proposal of ejecting euro members, which would need legal changes.

Market worries about Europe's economy have helped fuel the euro's fall to its lowest level against the dollar since April 2006 and lifted the price of gold, traditionally a safe haven when markets lose faith in other assets.

Euro zone finance ministers defended the euro as a "credible" currency on Monday, saying price stability in the region will remain for years to come and "is a major feature of the euro and a major asset for investors."

© Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

   
1Like our page
2Share
Headline
Some European governments must slash debt sharply but others should keep spending to boost growth across the 27-nation bloc, a top EU official urged Tuesday, as the region tries to solve a debt crisis by imposing budget cuts that risk triggering a new recession.European...
EU,Europe,Financial,Crisis
582
2010-25-18
Tuesday, 18 May 2010 11:25 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved