José Manuel Barroso said
that while he still believed in the need for sweeping economic reforms
and drastic cuts in budget deficits, such policies needed to have
"acceptance, politically and socially", which was now at risk.
"While this policy is
fundamentally right, I think it has reached its limits in many aspects,"
Mr Barroso said. "A policy to be successful not only has to be properly
designed. It has to have the minimum of political and social support."
Mr Barroso's comments
come as advocates of the eurozone's austerity-led crisis response are on
the defensive following a voter revolt in Italy, a deepening recession
in much of the bloc and the tarnishing of a highly-influential academic
treatise arguing high government debt severely hinders economic growth.
The Euro logo is seen in front of the European Central bank ECB in Frankfurt/Main, Germany, on April 4, 2013
Mr Barroso's views are
particularly influential because the commission has sweeping new powers
to rule on whether struggling eurozone countries are able to ease up on
belt-tightening.
His remarks came the same
day Eurostat released data showing debt in many struggling eurozone
countries continues to rocket despite unprecedented budget cuts and tax
increases.
Of the four eurozone
countries receiving rescue aid from the EU last year, only Greece saw
its debt levels decrease, from 170 per cent of economic output in 2011
to 157 per cent -- still the highest in the EU.
Irish, Spanish and
Portuguese debt levels all hit euro-era highs last year, with Portugal
close to surpassing Italy as the second most indebted nation in the
eurozone. Lisbon's debt jumped to 124 per cent of gross domestic product
from 108 per cent, narrowly behind Rome's, which rose from 121 per cent
to 127 per cent. Overall, eurozone sovereign debt rose to 90.6 per cent
of GDP last year, the highest on record.
The report also
highlighted the periphery's divergence from the eurozone's core,
particularly Germany, which was the only EU country to post a budget
surplus in 2012 but also saw its debt level remain flat for the third
straight year.
In another sign that
Germany is decoupling from the rest of the eurozone, German tax revenue
increased 3.4 per cent in the first quarter of 2013. In March alone, the
increase was 5.7 per cent on last year, according to official figures,
even though economic growth was 1.5 per cent.
"Falling unemployment
and higher wages are the biggest contributors to this development," said
Jens Boysen-Hogrefe, an economist and expert for public finances at the
Kiel Institute, who cautioned the trend may not continue since it
relied heavily on a high turnover in real estate. The sales tax on land
and houses rose by 14.3 per cent in March.
Still, Mr Boysen-Hogrefe
said the new data made it unlikely that Germany would post a budget
deficit of 0.5 per cent of GDP this year, as finance minister Wolfgang
Schäuble has estimated, noting Berlin would save €11bn alone on lower
borrowing costs in the bond market.
© The Financial Times Limited 201
0 comments:
Post a Comment