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EU fiscal chief U-turn: Shift to growth

May 9, 2012 at 2:30 AM   |   Comments

BRUSSELS, May 9 (UPI) -- The fiscal chief dealing with the euro crisis called for a shift to eurozone growth as Greece's leftist leader stepped up his nation's anti-austerity revolt.

"We are seizing the moment to advance our proposals in the new political climate," European Commissioner for Economic and Financial Affairs Olli Rehn said, acknowledging Sunday's French and Greek elections changed the face of European politics.

His comments came as European Council President Herman Van Rompuy called a special summit in Brussels May 23 to consider funding "growth-enhancing measures." The council is charged with defining European Union political directions and priorities.

The "informal dinner of heads of state or government" in Brussels -- five weeks ahead of a previously scheduled summit of EU leaders June 28-29 -- will let newly elected French President Francois Hollande unveil his euro crisis proposals, which demand investment across Europe to generate growth and create jobs -- a demand the European Commission, the EU's executive body, said it supported.

"We're no longer doomed to austerity," Hollande said in his victory speech Sunday.

"We will bring back Europe on a track for jobs, growth and the future," he said.

Rehn and EC President Jose Manuel Barroso said Tuesday it was likely EU leaders would agree next month to increase the budget of the European Investment Bank, the EU's long-term lending institution, by $13 billion to start large infrastructure "pilot projects" across Europe this year.

Socialist Hollande campaigned on a similar platform.

The EC said $107 billion in unused money from the EU's medium-term budget could be tapped to promote growth and jobs.

World Trade Organization Director-General Pascal Lamy and French economist Jacques Attali added their voices, calling for "investments in projects that generate growth" Tuesday in an op-ed piece appearing in the French daily Le Monde.

In addition, Rehn said he might relax tight fiscal conditions as early as Friday for countries struggling to meet binding budget targets.

Brussels Friday is to release new forecasts widely expected to show several eurozone nations veering off track in their debt-reduction plans.

The relaxation, based on new budget rules, could include extending timetables for meeting deficit goals.

The country that could most quickly benefit from such a shift is Spain, the Financial Times and Spanish newspaper El Pais said.

Spain is putting into action wrenching austerity measures to get its budget deficit down to 3 percent of economic output by the end of 2013. Delaying the 3 percent target a year would give Prime Minister Mariano Rajoy more time to soften the blow, the Times said.

But any loosening would not apply to Greece, whose bailout is subject to terms set by the EC, European Central Bank and International Monetary Fund, EC officials said.

Barroso warned Greek politicians their country was still required to honor its bailout terms.

In Athens, Alexis Tsipras, president of the Synaspismos political party and head of Coalition of the Radical Left parliamentary group, known as SYRIZA, said he viewed the bailout deal as null and void.

"The popular verdict clearly renders the bailout deal invalid," he said, pointing out two-thirds of Greeks voted Sunday for parties rejecting the bailout deal's "barbarous policies."

He called for a moratorium on Greek debt repayments, an investigation of Greek banks and the lifting of immunity of Greek members of Parliament to facilitate their prosecution if deemed appropriate.

Tsipras, 38, outlined a five-point plan he said he would put to conservative and socialist leaders Wednesday as he attempts to build a coalition.

He has been given three days to form a coalition government with other anti-bailout parties after a center-right attempt to form a conservative ruling coalition collapsed within hours Monday.

Conservative Antonis Samaras, leader of the New Democracy party, said Tsipras was asking politicians to sign up for a coalition that would mean "the destruction of Greece."

If Greece is unable to arrive at a ruling coalition, a repeat general election would likely be held June 10 or 17, officials said.

An ECB executive board member said for the first time Tuesday Greece might have to exit the eurozone-- an option the ECB had previously refused to acknowledge publicly.

"Greece needs to be aware that there is no alternative to the agreed reform program if it wants to remain a member of the eurozone," Joerg Asmussen told the German business newspaper Handelsblatt.

The ECB, EC and IMF are to rule at the end of June on whether Greece is doing enough to receive its next $15 billion bailout payment.

If Greece does not receive it, Athens would likely be forced to default on its entire $260 billion debt and exit the single currency, analysts said.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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