Quest for growth prompts new dispute among eurozone finance chiefs over strict deficit rules

BRUSSELS – Leading European finance officials clashed Thursday over whether the 18-nation eurozone's budget deficit rules are so strict that they choke off economic growth.

France, Italy and others who are struggling to meet the fiscal targets are pushing for more flexibility but are facing an uphill battle because of opposition by the bloc's economic heavyweight, Germany.

"The right rhythm for each of the countries has to be found" in regard to debt and deficit reduction, French Finance Minister Michel Sapin said in Luxembourg. It's about striking the right balance between sound finances and providing "the necessary stimulus for growth," he added.

But Germany's Wolfgang Schaeuble said the exisiting rules provide sufficient flexibility and insisted solid public finances and structural reforms will spur growth and job creation.

The push for more leeway comes as the eurozone is emerging from years of crisis that had threatened the very survival of the currency used by some 330 million people. At the heart of the crisis were countries that had amassed so much debt that their borrowing costs spiraled out of control as investors took flight. Facing bankruptcy, five countries needed rescue loans from their European peers.

To overcome the crisis, a German-led approach prevailed insisting on savings measures and structural reforms to restore competitiveness and investor confidence. However, with unemployment still stubbornly high in many southern European nations and government borrowing costs falling to new lows, pressure has grown to ease the rules.

Eurozone nations have to keep their deficits below 3 percent of gross domestic product and total debt below 60 of GDP. Those not meeting the criteria have to submit plans on how to get their finances back in order to the European Commission, the bloc's executive arm.

"It's important that we respect the fiscal rules," said EU Economics Commissioner Olli Rehn.

Later Thursday, the International Monetary Fund is set to publish an assessment of the eurozone's economy. IMF chief Christine Lagarde is due to present the report's policy recommendations to the ministers at their meeting in Luxembourg.

The eurozone debate on financial policy coincides with the tough negotiations on who will be the next president of the European Commission. The bloc's 28 leaders are set to discuss policy priorities for the next Commission at their summit late next week. Italy, the eurozone's third-largest economy, reportedly seeks concessions on the budgetary discipline before endorsing a candidate.

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