MNI SOURCES: EC To Push For "Broadly Neutral" EZ Fiscal Stance

--Commission Wants Broadly Neutral Euro Area Aggregated Fiscal Stance

--Move Follows More Prescriptive Recommendation From Last Year

by Jean Comte

     BRUSSELS (MNI) - The European Commission will unveil Wednesday a fiscal

recommendation for the euro area as a whole, in which it will push for a

"broadly neutral" fiscal stance in 2018, Market News understands.

     The "broadly neutral" stance will refer to the aggregated fiscal stance of

the 19 euro area countries, meaning some may have to loosen their fiscal policy,

whereas some others might have to tighten. However, no specific country is

expected to be named in the recommendation.

     "Growth is around 2% this year -- that means there is no need to have a

very expansionary policy, but also no risk to overheat the economy with a

neutral stance," a European Union official with good knowledge of Commission

thinking told MNI. 

     This recommendation is then expected to be less controversial than the one

issued in November 2016 for the year 2017 -- which was asking for "a fiscal

expansion of up to 0.5% of GDP". 

     The push for an expansionary policy, as well as the precise figure, was

rejected by fiscal hawk nations, such as Germany. The move was even more

controversial as a separate document describing the fiscal position of each

country strongly suggested any fiscal expansion was mostly falling on Germany.

     When adopting the recommendation in early 2017, finance ministers kept a

reference to the "positive fiscal stance for the euro area as a whole", but

deleted the 0.5% target figure.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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