As European Union growth slows, European commissioners signaled in written answers to EU lawmakers published on Friday their preferred measures to revive the economy, with the commissioner-designate for taxation, Paolo Gentiloni, pushing for fiscal leeway and Commission Vice President Valdis Dombrovskis calling for a “responsible fiscal policy.”
“I will seek to have the Commission apply the Stability and Growth Pact, making full use of the flexibility allowed in the rules,” Gentiloni said, repeating recurring calls from Italian politicians who see the bloc’s fiscal requirements as too strict.
Dombrovskis, who will decide together with Gentiloni how to apply the rules in the coming five years, was more cautious, confirming his reputation as a defender of fiscal discipline.
“We should be vigilant to possible risks to economic and financial stability and preserve sustainable public finances,” he said.
But he also called for more public investment from states with low debt, like Germany or the Netherlands.
In remarks that may not go down so well in high-debt countries such as Italy or Greece, Dombrovskis said measures were needed to encourage banks to reduce their exposure to bonds issued by their home states.
Highly indebted states fear that pushing banks to diversify their sovereign bond holdings could increase yields on their public debt, as national lenders would dump riskier paper in favor of safer securities.
Dombrovskis also urged the acceleration of reforms that could help banks sell their bad loans, the amount of which relative to total lending is decreasing but still high in Italy, Greece, Cyprus and Portugal.