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Europe grapples with budget blues

Tuesday, October 14, 2014 - 02:08

Germany presents its economic outlook as more gloomy data is released. As David Pollard reports, its weakening growth and France's refusal to tighten its spending add to the pressures on Europe's Finance Ministers as they meet in Luxembourg.

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It fell to economy minister Sigmar Gabriel to deliver the numbers. Germany's downward revisions to its GDP forecasts were as expected - but unwelcome nevertheless. SOUNDBITE (German) SIGMAR GABRIEL, GERMAN ECONOMY MINISTER: ''Our current forecasts are that growth of 1.2 per cent in 2014 and 1.3 per cent in 2015 can be achieved.'' The day had already seen another dose of gloom on the German economy - in the shape of the ZEW confidence indicator. It fell to minus 3.6 in October - its lowest reading in nearly two years. That sharpens - even more - the debate over whether Berlin should loosen the purse strings. ING's Carsten Brzeski. SOUNDBITE (German) CARSTEN BRZESKI, ING: ''We must watch out that we have not only sustainable government finances in the future, but also sustainable growth - and for that reason we have to think again about balanced budgets.'' But any compromise may be a long time coming, according to Michael Hewson of CMC Markets. (SOUNDBITE) (English) MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS: ''Yes, economic data has been poor in Germany. But unemployment is still at multi-lows, and I think until that particular measure starts to push upwards, then I think you're going to get a very significant German reluctance to deviate away from its policy of fiscal discipline.'' There's been no hint of compromise from Wolfgang Schaeuble at this week's meeting of euro zone finance ministers in Luxembourg. But an even bigger worry may still be France - and its apparent refusal to fall in line on its budget. Michel Sapin suggested any major changes to French plans to break EU deficit rules would be difficult. Jeroen Dijsselbloem is the Eurogroup chairman. SOUNDBITE (English) EUROGROUP PRESIDENT AND DUTCH FINANCE MINISTER, JEROEN DIJSSELBLOEM, SAYING: "But once again, the figures we are hearing from Paris are not very hopeful. I have said this before, but the final verdict will have to come from the Commission first before we talk about it in detail in the Eurogroup, but there are certainly concerns there." France presents the budget to the European Commission this week. The two could be on a collision course if the Commission rejects the budget outright - a move which could also cause France even more international embarrassment.

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Europe grapples with budget blues

Tuesday, October 14, 2014 - 02:08