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EC Calls for Eurozone Budget Spending for Growth but Germany Sticks to Austerity Mantra

Wolfgang Schaeuble
The German Ministry of Finance rejected the request of the European Commission that called on Eurozone governments to move towards fiscal loosening in order to inject growth and development. Though Germany was urged to move further away from its mantra of austerity and spend more, loosening its budget for 2017, the country was reluctant to oblige and held on to the same policy of austerity that has crushed cash-strapped Greece.
Following shocks caused by June’s Brexit and Donald Trump’s election, the EU is worried that this could stunt recovery in the EU. The idea of more spending would be to spur growth and jobs over the 19-country eurozone. Slow growth and high unemployment have caused concern to the EC, however, Germany was not specifically named by the call, where Chancellor Angela Merkel’s conservatives are gearing towards an election next autumn.
Specifically, the EC said, in its review, that “there is a case for a significantly more positive fiscal stance for the euro area.” The same report essentially points out that austerity on which the Greek recovery program is based has not accelerated growth and “there is still significant unused capacity in labor and capital and uncertainty is high.”
Greece has been one of the countries to suffer most from German-backed EU austerity that is aimed at cleaning up state finances despite protests in many countries and concern from Washington. The aggregate deficit forecast by the EC is believed to show a decrease to 1.8 percent this year and 1.5 percent in 2017. What the figures do not show however, is the humanitarian cost of this “success.”
At a news conference, EU Economics Commissioner Pierre Moscovici said: “We want to deepen the economic and monetary union and the Commission is acting as a finance minister of the euro area. This is a key step toward a budgetary union in the euro area. We are orienting fiscal policy for the euro area.”
“Those who have budgetary leeway should spend and invest more for themselves and in the interests of all,” Moscovici said, however, his words may be falling on deaf ears as German Finance Minister Wolfgang Schaeuble has long contested such a suggestion, especially in his particular zealousness when enforcing austerity in Greece.

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