Finance ministers wrestle over deficits, growth

AP News
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Posted: Oct 13, 2014 3:25 PM
Finance ministers wrestle over deficits, growth

The head of the eurozone finance ministers' group said Monday the ministers are not satisfied with the stagnant economy and agree "strong measures" are needed to get it moving again.

Eurogroup head Jeroen Dijsselbloem said the ministers were looking at ways to reward countries for reforming their economies by giving them financial help with new investment in infrastructure.

European officials are trying to push countries such as France and Italy to make their economies more business friendly. There is also a debate about how to find more money for investment. If countries make the effort, Dijsselbloem said, the EU could "support those efforts by supporting investments in those countries."

Dijsselbloem spoke after the ministers met Monday in Luxembourg to debate what to do about the shaky growth prospects for the 18 members of the euro currency union. They had zero growth in the second quarter, and the chance that the eurozone might fall into recession remains a key risk factor for an uncertain global economy. Third quarter figures are due next month.

Growth has stalled as many countries cut spending to reduce excessive levels of government debt, removing the impetus of government spending from the economy. Germany, the biggest eurozone economy, is in better shape but has focused on reducing its deficit rather than spending on new infrastructure, a stance that has brought pressure from the United States and some eurozone governments.

European Central Bank head Mario Draghi has urged countries that have room to spend more to do so. Others, such as France and Italy, are being pushed to ease rules on hiring to make their economies more business friendly and attractive to new business investment.

Jean-Claude Juncker, incoming head of the EU's executive commission, has proposed a 300 billion-euro ($380 billion) investment program, but it's not clear where the money would come from. Germany is opposed to borrowing for infrastructure spending, at least at the national level.

France has said it will miss its targets for reducing its budget deficit in according with eurozone budget rules. There is talk of easing pressure on France to comply if there is a sign of progress on pro-growth, structural reforms, although Dijsselbloem was adamant the rules must be observed. Eurozone countries must submit their budgets for review ahead of Wednesday's deadline.