‘EU must stick with austerity’

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The European Union's fresh push for growth must not compromise its drive for austerity, Italian Prime Minister Mario Monti said Thursday, as he joined leading EU politicians in defending the bloc's sometimes unpopular belt-tightening measures.

Italy is among the EU countries that have faced the greatest pressure to consolidate their finances, amid sustained market jitters about its future.

Even as his country struggles to meet EU targets, Monti said it is essential that the bloc's new budget discipline pact - the so-called fiscal compact - does not meet the same “unglorious end that was the case for the stability pact in 2003.”

That year, Paris and Berlin successfully lobbied other EU governments to let them escape sanctions after breaking the eurozone's public deficit limit. They later managed to push through a reform that watered down the enforcement of the rules.

“We welcome the greater accent now given by others to growth objectives in the EU policy agenda,” Monti told attendees of the European Business Summit in Brussels.

But he also added that “we should all together work very fast to have a strategic framework to have growth, without conflicting with ... good working budgetary discipline.”

The EU has been working to bring growth measures to the forefront, amid tensions across Europe triggered by voter anger about the tough round of austerity - which the EU argues is essential to overcome the economic crisis gripping the continent.

“We all realise just how vital budgetary discipline is. But the key question now is how to rediscover the road to growth,” Belgian Prime Minister Elio Di Rupo said at the business summit. “I find it unacceptable that young people no longer believe in a better future.”

He echoed European Central Bank President Mario Draghi by calling for a “European pact on growth” to complement the fiscal compact.

Growth is expected to be high on the agenda of EU leaders when they next meet for a summit on June 28-29. EU President Herman Van Rompuy said on Thursday that he might convene “an informal leaders' dinner” before then to pave the way.

Part of the challenge is the sometimes “schizophrenic demands” the EU faces, Van Rompuy said at the business summit - with calls for austerity to convince shaky markets on one day and blame for austerity strangling growth on the next.

He argued that both go hand-in-hand.

The effects of austerity measures “are not immediate nor can they be, but they will make a difference over time and create jobs in due course,” Van Rompuy said. “Fiscal consolidation does not just equal momentary austerity. It also means investing in the future.”

To help stimulate growth, Van Rompuy called for more capital to be poured into the European Investment Bank, which helps funnel loans to businesses and projects.

Di Rupo, meanwhile, called for a financial transaction tax, a proposition that has so far failed to find consensus among EU countries. - Sapa-dpa

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