Finance ministers from the 19 Eurozone countries will gather today in Luxembourg to discuss the funding of a budget for
Finance ministers from the 19 Eurozone countries will gather today in Luxembourg to discuss the funding of a budget for the area and, most pressingly, fears of a looming recession.
With interest rates already in the negatives following a cut last month, the European Central Bank cannot rely on monetary policy alone to promote investment. Today’s meeting will stress that the sluggish Eurozone economy requires preemptive fiscal stimulus if it wishes to avoid a long-term period of slow growth.
With the hopes for a robust Eurozone budget—which would allow for fiscal stimulus in times of crisis—dwindling for the foreseeable future, the burden of fiscal relief falls mostly on Berlin. However, Chancellor Angela Merkel won’t jeopardise the long-balanced German budget, which would prove extremely politically unpopular, unless the situation is dire.
She is likely to only release additional stimulus spending once the German economy officially enters a recession, which it probably did in the third quarter this year. As such, any stimulus measures, which would likely centre around infrastructure or climate change spending, would be reactive, prolonging the slump’s duration. Should the German economy go into full-blown recession, it will likely to drag the rest of the Eurozone down with it, making prompt fiscal stimulus critical.