Senior European officials are championing an investment pact to stimulate economic growth in the eurozone, as voters in France and Greece look set to punish leaders who have backed tough austerity measures.
In a marked shift of emphasis, Olli Rehn, the EU’s top economic official, on Saturday called for additional government spending for large-scale infrastructure projects, arguing there was not sufficient private sector demand to create jobs. Unemployment has surged in several eurozone countries, hitting its highest levels since the creation of the single currency, and fuelling voter anger.
The commissioner also gave a clear signal that he was willing to loosen the EU’s tough new budget rules for countries like Spain, which has been forced to slash public spending in the face of a sharp economic downturn to meet Brussels-mandated deficit levels. “The stability and growth pact is not stupid”, Mr Rehn said. “Yes, the EU fiscal framework is rules-based, but at the same time, the pact entails considerable scope for judgement when it comes to its application.”
Much of Mr Rehn’s “European investment pact” – more funding for the European Investment Bank, creating eurozone bonds to fund infrastructure projects, and using the EU’s own budget to co-finance new investments – has been proposed in the past. But publicly detailing the agenda on the eve of the French presidential election is a sign of how much an expected victory by challenger Mr Hollande has shifted the Brussels debate.
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