Dan AtkinsonEurozone finance ministers are preparing for a key meeting in Luxembourg tomorrow, with problem economies such as Greece and Italy high on the agenda.
The 19 members of the EU that use the euro face a busy schedule of topics ranging from economic growth to the sustainability of pension systems.
They will discuss also the International Monetary Fund’s (IMF) latest forecasts for growth, prices and jobs.
Central bank to end money creation programme
This will be the first eurozone finance ministers’ meeting since, earlier this week when German Chancellor Angela Merkel agreed to French calls for a eurozone budget, separate from the European Union budget and with its own stream of tax revenue. The eurozone ministers are known collectively as the Eurogroup.
This budget would promote convergence among the eurozone economies and help those that are currently less competitive. It is thought to be less ambitious in scope than had been hoped for by French President Emmanuel Macron.
A second significant development ahead of the Eurogroup meeting was the announcement earlier this month that the European Central Bank (ECB) is to end its “quantitative easing” (QE) money creation programme in December in response to better growth in the eurozone. But ECB president Mario Draghi has suggested interest rates will stay low.
A quickening of the eurozone’s economic pulse is good news, but at the same time, the Eurogroup, also known as the Eurogroup consilium, meets as Italian politics has thrown up a populist challenge to the single currency and the rules that underpin it, known as the Stability and Growth Pact.
Inflation is forecast at 2.4% this year and 2% next year, against 2.5% and 2.4% in America.
Germany urged to spend more
Unemployment, long a blight on the eurozone, is expected to remain high by international standards, at 8.4% of the workforce this year and 8.1% next year, against rates of 2.5% and 2.4% respectively in the US.
But the eurozone’s forecast current account surplus of 3.2% this year and 3.2% against next year is almost a mirror image of America’s current account deficits, forecast at 3% this year and 3.4% next year.
But the fund suggested also that countries such as Germany should use their strong fiscal position to spend more. “Germany has fiscal space that should be used to increase public investment in areas that will lift potential growth by improving productivity and increasing the labour force participation of women and recent immigrants,” it said.
The Eurogroup meetings comes 24 hours ahead of a meeting of the full European council of finance ministers, which includes ministers from the nine EU members that do not use the euro.