European Commission should focus on budgets, not stimulus, Dijsselbloem says

Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem reacts during a European Union finance ministers meeting in Brussels, Belgium, July 12, 2016. REUTERS/Francois Lenoir

BRUSSELS (Reuters) - The European Commission should focus on enforcing European Union budget rules rather than proposing fiscal stimulus, the chair of the Eurogroup of euro zone finance ministers said on Tuesday, in remarks that echo Germany’s position on tight spending.

With euroscepticism growing in Europe after years of slow growth and persistent unemployment, the commission - the executive arm of the EU - proposed earlier in November loosening budget policy for the 19-country euro zone. It suggested fiscal expansion of 0.5 percent of gross domestic product next year.

But Jeroen Dijsselbloem challenged those proposals at a hearing of the economic affairs committee of the European Parliament, reminding the Commission that its role is to monitor the application of fiscal rules in EU countries.

“Between the recommendation on fiscal expansion and upholding the rules on the fiscal trajectory that come from the pact, there is some tension,” Dijsselbloem said. “They can’t both be true. The first responsibility of the Commission is to uphold the pact.”

Dijsselbloem’s comments come a few days before a regular meeting of euro zone finance ministers in Brussels on Dec. 5, where fiscal policy will be among the subjects under discussion.

The Commission proposal was meant to stimulate more spending by Germany, the euro zone’s biggest economy and a country with both a budget and a trade surplus.

German Finance Minister Wolfgang Schaeuble quickly criticised the Commission’s proposals, saying that Germany has increased investment more than the euro zone average in the last decade.

Over the past two years, the commission has given several euro zone countries leeway on the spending limits set by the fiscal rules, in a bid to rejuvenate the bloc’s sluggish economy. Italy, Spain, Portugal, France, Cyprus are among the main beneficiaries of the more flexible approach adopted by the commission led by Jean-Claude Juncker.

Reporting by Francesco Guarascio, editing by Larry King