"EU's Goal For Budgets Threatened" (deficit spending) -
Meeting Due to Approve Austria's Plan for Deficits
Paris, Monday, January 18, 1999 International Herald Tribune
Bloomberg News
BRUSSELS - European Union finance ministers will give the go-ahead
Monday for Austria to continue posting budget deficits, an indication that the 15-nation bloc will abandon the goal of balanced budgets to combat the deepening economic slowdown, EU officials said Sunday.
Although Austria's four-year deficit-limitation plan was criticized as being ''very modest,'' a communiqué drafted for the ministers' meeting, which begins Monday, endorses the plan as ''fully in line'' with EU objectives. Austria also escapes criticism for dropping the pursuit of a balanced budget by 2002.
Europe is dependent on brisk economic growth to keep its new 11-nation
currency, the euro, popular and can tolerate some deficit spending ''as long as there is no real dramatic, 180-degree turn in fiscal trends quickly,'' said Allan Saunderson, editor of Frankfurt Money Strategist.
The case of Austria, which accounts for 3 percent of the euro zone's economy, reflects the determination of Europe's revitalized center-left governments to prop up their economies as sagging export demand threatens to turn a slowdown into a full-scale recession.
The bloc's largest economy, Germany, either stagnated or contracted in the final months of 1998, analysts said last week after the German government released a full-year estimate. Italy on Friday reported a greater-than-expected 1.5 percent decline in industrial production in
November.
Analysts said the report card on Austria could set a precedent when the EU reviewed nine more budgets by mid-March. Germany and France, for example, have also renounced the goal of eliminating deficits by 2002, while Italy's projections reach as far as 2001.
Austria set a target of reducing its deficit to 1.4 percent of gross domestic product by 2002 from 2.2 percent last year.
Separately, EU officials were upbeat as a two-day meeting with Asian
finance ministers ended Saturday in Frankfurt, saying that the worst of the Asian crisis was over. At the same time, however, concern grew about the latest trouble spot, Brazil, which let its currency sink last week. About 6 percent of EU exports go to Latin America.
Finance ministers also said they had discussed the possibility of pegging Asian money to a basket of international currencies, including the euro.
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