Eurozone finance ministers to meet on Monday and discuss the need for more fiscal stimulus

Finance ministers of the Eurozone are to hold a meeting on Monday to discuss a document that accentuates the requirement of tweaking the region’s monetary policy to add more fiscal stimulus and fuel growth. Such a strategy is expected to increase German spending amidst the rising risks of a new downturn.

For years, Eurozone finance ministers from 19 member states have voted in favor of a broadly neutral monetary policy in the annual meeting that requests for recommendations on fiscal policy. The European Central Bank, however, has reiterated the need for leniency in policy on multiple occasions while states with slow-growth look for greater investments from the Eurozone.

Germany Posted Weaker Than Expected Economic Growth In 2019

The largest European economy, Germany, has so far supported austerity to address the challenges of fiscal imbalances in Italy, Greece, and other high-debt countries. Following weaker than expected economic growth in Germany in 2019, however, Berlin was recently reported to have softened its stance on the current policy. Much of the economic weakening, as per the experts, is attributed to the recent outbreak of Coronavirus in China that is fueling higher risks of a downturn in the upcoming months in Germany.

According to the European Union document:

“If downside risks were to materialize, fiscal responses should be differentiated, aiming for a more supportive stance at the aggregate level.”

As per the statement from the EU officials earlier on Monday, the finance ministers will be holding a debate on the aforementioned document later on Monday in Brussels. The meeting’s agenda also highlighted that the document is likely to be adopted by the Eurozone on Tuesday.

Germany Recorded Significant Budget Surpluses In The First Three Quarters Of 2019

The text emphasizes a primary requirement for higher spending to be in line with the EU fiscal regulations that demand less than 3% of GDP (gross domestic product). Uncertainty also remains in the Euro zone’s definition of a downturn that may be construed as sufficient to kickstart the expansionary policies.

The national governments will solely be in charge of deciding whether to implement the recommendations of the meeting. German Finance Minister Olaf Scholz recently commented that the largest European economy is likely to increase spending amidst times of economic crisis. Despite the economic slowdown in 2019, Germany recorded significant budget surpluses in the first three quarters of the last year, according to the figures released by Eurostat in January.