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(Bloomberg) — The European Union’s commissioner for the economy, Paolo Gentiloni, has rejected German demands for a review of the bloc’s fiscal framework, saying it is not realistic to impose very strict rules on all member states.
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Speaking in an interview with Bloomberg TV, Genetti warned that the committee’s proposal on how to fix sovereign debt reduction requirements should only be modified “cautiously.”
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The group’s plan is designed to address the perceived failures of the prescriptive approach used decades before Covid-19 – and which Gentiloni said “didn’t work”.
“I understand the German position, it’s legitimate, but I don’t think it’s realistic to impose very restrictive common standards,” Gentiloni said in Gandhinagar, India, where he is attending a meeting of G20 finance chiefs. The fact is that the situation is very different among European countries. It is difficult to have a restrictive standard that is suitable for everyone.”
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The renewal of European fiscal rules has pitted countries like France and Germany against each other, the former seeking more flexibility in reducing debt levels while the latter arguing in favor of strict automatic rules.
The European Union Commission, the EU’s executive arm, unveiled legislative proposals for reform in April and aims to reach an agreement among member states this year. The agreement was put on hold during the Covid-19 pandemic and then again until the end of 2023 due to the Russian war in Ukraine.
The Commissioner also said that the European economy is not facing a compressed recession as production is still expanding – even if slowly.
We still have growth, and we expect to have even stronger growth in 2024. “We have an incredibly flexible job market,” Gentiloni said. While the “incredibly positive tourism season” should fuel the service economy, the troubled manufacturing sector is also expected to resume expansion in the fourth quarter.
The eurozone economy is struggling to gain momentum after a shallow recession during the winter. And while overall inflation has been slowing thanks to lower energy costs, core price gains have been more steady – keeping European Central Bank officials on edge.
— with assistance from Corinne Abraham and Andy Clark.