July 10, 2017 / 3:58 PM / 5 months ago

Germany under new EU pressure to increase spending

BRUSSELS (Reuters) - The European Union’s economic leaders called on Monday for euro zone countries with high growth to spend more, an attempt to persuade Germany to step up its public spending and strengthen the bloc’s economy.

Light-emitting diode (LED) street lamps illuminate a road in Langen, Lower Saxony, May 23, 2013. REUTERS/Fabian Bimmer

Germany’s economy is expected to expand by 1.8 percent this year, according to upwardly revised estimates from the International Monetary Fund. Meanwhile, its trade surplus keeps growing.

The expansion of the German economy has not, however, been matched by similar growth in public spending; the country recorded a 0.8 percent fiscal surplus last year.

“It would help the economy of the euro zone as a whole if the countries that already have big growth would allow for an expansion of the demand side, in other words increase wages or lower taxes,” Jeroen Dijsselbloem, the head of the Eurogroup of euro zone finance ministers, told reporters before a regular meeting in Brussels.

Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem arrives at Eurozone finance ministers meeting in Brussels, Belgium July 10, 2017. REUTERS/Francois Lenoir

The bloc’s finance ministers will discuss at their monthly meeting the fiscal stance of the euro zone for next year as part of talks aimed at influencing budgetary decisions of the 19 member states.

An attempt by the European Commission to aim for a slightly expansionary fiscal policy for the euro zone as a whole this year was met by German opposition and was eventually dropped.

Before talks on next year’s policy, Economics Commissioner Pierre Moscovici said the rationale for a fiscal stimulus still existed, even if the euro zone is now growing healthily.

But at their meeting, euro zone ministers agreed later that the fiscal stance of the euro zone for 2018 should be “broadly neutral”, Moscovici said.

He added, however, that this should mean that countries with high deficits or debts, such as France or Italy, should continue with the consolidation of their public finances. But states with fiscal space, like Germany, “should use those resources to support demand, in particular investment”.

Reporting by Francesco Guarascio @fraguarascio, editing by Larry King

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