France and Italy to propose changes to the Stability Pact.
The French and Italian government plan to present changes to the Stability Pact, which defines fiscal rules for Euro area countries, at the upcoming EU summit end of next week. The proposal foresees that government investment to support growth and employment should not be counted anymore for the budget deficit. In return, countries need to make binding promises for structural reforms. While the SPD parts of the German government seem to be in favour of such a change, Chancellor Merkel and finance minister Schäuble are unlikely to approve this proposal. Deputy finance minister Kampeter (CDU), for example, said that the current rules already provided a sufficient degree of flexibility.
This is a very very welcomed and surprising proposal from France and Italy. This is a critical step to reduce Europe s grip on members monetary/fiscal sovereignty which will ultimately allow for more budget deficit needed to kickstart economic growth (pls see article of 2012 for detailed explanations). Someone need to spend!
