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29 May 2013
Flash: EC gives signs of softening austerity drive - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX analysts at the Bank of Tokyo Mitsubishi UFJ notes that the European Commission is expected to give its clearest signal yet that it is softening its stance on demanding austerity measures in the EU.
he notes that in its annual verdict on the national budgets of EU members, France, Spain, and the Netherlands are expected to be given a waiver on the annual 3.0% deficit limit. France and Spain’s deficit deadlines are likely to be extended by two years although they will still have to take stringent measures to reduce their deficits. Further, he adds that the European Commission is also expected to free Italy from intensive fiscal monitoring. Officials will insist that they are not abandoning fiscal discipline with the extra budget leeway given on the condition that national governments implement stalled labour market reforms. He writes, “A slower pace of fiscal tightening makes sense given the weaker than expected euro-zone growth outlook and reduced market pressures from lower yields following support from the ECB’s OMT programme. At the margin a slower pace of fiscal tightening should be modestly supportive for the euro.”
he notes that in its annual verdict on the national budgets of EU members, France, Spain, and the Netherlands are expected to be given a waiver on the annual 3.0% deficit limit. France and Spain’s deficit deadlines are likely to be extended by two years although they will still have to take stringent measures to reduce their deficits. Further, he adds that the European Commission is also expected to free Italy from intensive fiscal monitoring. Officials will insist that they are not abandoning fiscal discipline with the extra budget leeway given on the condition that national governments implement stalled labour market reforms. He writes, “A slower pace of fiscal tightening makes sense given the weaker than expected euro-zone growth outlook and reduced market pressures from lower yields following support from the ECB’s OMT programme. At the margin a slower pace of fiscal tightening should be modestly supportive for the euro.”