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Germany leads preparation for fiscal stimulus in eurozone

By Philip Smith

The 19 EU members using the currency say fiscal, not monetary, policies should be considered if the slowdown continues

Olaf Scholz, Germany's finance minister, is considering the benefits of economic stimulus API

Finance ministers from the 19 EU member states using the euro are increasingly backing calls for a round of economic stimulus.

Olaf Scholz, Germany’s finance minister, said the eurozone should be ready to spend more if a downturn hits its economy. It is seen as a cautious move towards backing greater public investment after years of following a neutral fiscal policy.

The smaller and slower-growing eurozone states have been calling for such a stimulus for some time. Yet the major powerhouses – notably Germany – have resisted.

A slowdown in the euro economies at the end of last year may be behind this change of heart. That, and the growing impact from coronavirus, which threatens to be a drag on any hoped-for recovery.

This shift in attitude could result in EU fiscal rules being relaxed, so allowing greater levels of government spending.

France, another of the economic chiefs in the bloc, has welcomed the shift. Finance Minister Bruno Le Maire declared it a breakthrough. “For the first time in years the 19 countries of the eurozone say that we should use the fiscal stimulus,” he said after a meeting of EU finance ministers.

There are 23 countries that use the euro: 19 members of the EU – Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain – together with Andorra, Vatican City, Monaco and San Marino.

FURTHER READING: Eurozone GDP growth poorest since 2013

FURTHER READING: Eurozone industrial production shrank in October

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