Brussels - Germany's potential for economic growth is far too low and the country must invest more, the EU's top economic official said on Friday, joining a growing chorus of leaders who want Europe's biggest economy to spend more to avoid euro zone stagnation.
Germany is looking increasingly isolated on its prescription for an economic revival with its focus on balancing the books and avoiding new debt, while France, Italy, the United States and the IMF want to see Berlin agree to more public spending.
“What we have heard from Germany is that their potential growth is currently 1.5 (percent), or something like that. This is far too low. This is really an issue. We need investment, also in Germany,” said Jyrki Katainen, who will take over as the European Commission's vice president for jobs, growth, investment and competitiveness on November 1.
After the euro zone's revival came to a halt in the second quarter, the currency area has sought to shift course away from the spending cuts that marked the bloc's initial response to 2009-2012 crisis, but Germany says budget rigour must continue.
The European Commission, which acts as a budget policeman for the 18-country euro zone, is reviewing member states' draft budget plans to see if they are in line with EU budget rules.
The rules oblige governments to strive every year towards balancing their books and avoid any repeat of the 2009-2012 euro zone crisis, where countries spent well beyond their means.
On Italy's 2015 budget plans, Katainen, who is currently the EU's Economic and Monetary Affairs Commissioner, said he needed more information from Rome.
“We expect some response and let's see it,” he told reporters.
The European Commission has asked Italy to explain why its draft budget for next year will breach debt-reduction goals it promised the European Union, a step that may lead to demands from Brussels for changes to the budget package. - Reuters