Euro zone, Germany back fiscal boost in the event of downturn

By Ritu,

Capital Sands

The euro zone should be ready for a fiscal boost if a downturn hits its economy, Germany’s finance minister and his counterparts from other countries of the bloc said in a joint document adopted on Tuesday.

The move was deemed as a breakthrough by France’s Finance Minister Bruno Le Maire, who said it was the first time the 19 countries of the currency area had given their nod to more fiscal stimulus after having urged for years a “broadly neutral” fiscal stance.

“If downside risks were to materialize, fiscal responses should be differentiated, aiming for a more supportive stance at the aggregate level, while ensuring full respect of the Stability and Growth Pact,” said the statement adopted on Tuesday by EU finance ministers after having been supported by the euro zone on Monday.

Germany’s Finance Minister Olaf Scholz agreed to the joint text in a move that could pave the way for Berlin to spend more next year.