Sunday

17th Oct 2021

EU summit unlikely to change austerity drive

  • The two-day summit will focus on eurozone economy and EU-Russia relations (Photo: European Council)

EU leaders are meeting for a two-day summit in Brussels starting on Thursday (14 March) to take stock of lagging reforms aimed at jump-starting the economy.

The summit is to start at 17.00 Brussels time after EU leaders go to their respective political family gatherings.

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European Parliament chief Martin Schulz is likely to repeat his warning that a blind austerity drive may have saved the banks, but at the cost of an entire generation of youngsters who cannot find a job.

His native country, Germany, continues to argue that sticking to the EU deficit and debt rules, cutting back budgets and making it easier for companies to hire and fire workers will eventually pay off, even as economic forecasts show a longer-than expected recession in the eurozone.

Speaking to journalists in Berlin on Wednesday, German finance minister Wolfgang Schaeuble said his government is setting a "positive example" of budget discipline as it plans to reach a zero deficit by 2015. With tax revenues at record highs and borrowing costs at historical lows, Germany stands in stark contrast with most countries in the eurozone.

The German delegation insisted for the term "fiscal consolidation" to be inserted at least four times in the latest draft conclusions, according to an EU source.

Meanwhile, France is trying to shift the focus onto the so-called growth pact - a collection of initiatives such as pilot investment projects and a €6 billion scheme to help unemployed youngsters to get a job. The measures were approved last year, but the necessary legal acts are still not finalised.

Paris itself is struggling with EU deficit targets with President Francois Hollande earlier this week admitting that his country will miss this year's deficit target by 0.7 percent.

One question is whether the country will be granted extra time to meet its deficit target, as was the case for Spain.

While Germany and France appear unlikely to clash on this issue after conciliatory comments by German finance minister Wolfgang Schaeuble, there may be a clash between Germany and the UK.

The potential dispute is over pending and upcoming legislation for EU's single market, one EU official said, as British PM David Cameron is against over-regulation.

Cyprus creeps onto agenda

A snap meeting of eurozone finance ministers has been called for Friday evening, in a bid to thrash out the details of a bailout for Cyprus. This has fed speculation that a deal may already be agreed the night before, during a late-night meeting of eurozone leaders who will stay on after the dinner among 27.

A German official in Berlin however downplayed expectations for a deal at this summit. "It is not on the official agenda, although informal discussions may take place. But essentially this is a matter for eurozone finance ministers," the official said.

The eurozone leaders' meeting had indeed been planned earlier, as these gatherings now have to take place at least once every six months. European Central Bank chief Mario Draghi is to present an overview of the economic situation in the euro area.

The newly-elected Cypriot President, Nicos Anastasiades, will also take part in the meeting and is likely to mention his country's request for financial assistance.

But Germany is not indicating any rush to get a deal by the end of this month as was originally planned with Schaeuble noting that Cyprus "still has money for a couple of months."

He also appeared irritated at the snap Eurogroup meeting, of which he had heard only "via Twitter."

"I am an old-fashioned man, I need a proper invitation. Also I need to get a mandate from the Bundestag first," Schaeuble said.

Russia

Russia will also feature in an informal discussion of EU leaders on Friday. It will be an attempt to assess the relationship, with some countries openly criticising human rights abuses in Russia, but then quietly signing energy deals with it.

"The point is, Putin is there to stay. Like it or not, we have to deal with him," one EU official explained.

A similar strategic discussion about China took place in December and one on the US is scheduled for May.

Eurozone recession to continue in 2013

The eurozone economy will shrink by a further 0.3 per cent in 2013, the European Commission has said. The bloc will have to wait until 2014 before seeing economic growth.

Opinion

Why austerity is failing in Europe

Until recently, Brussels has supported primarily front-load austerity measures. When President Hoover tried similar policies in the 1930s America, a severe recession morphed into a devastating Great Depression.

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