How to bring more money to Europe’s highly indebted governments and revive the continent’s ailing economy? Those were the issues EU finance ministers struggled with at a meeting in Brussels.
The EU stuck to its official line that painful austerity has to continue in order to slash government debt.
But many economists say that while the high debt of European countries indeed hinders growth, excessive budget cuts will so the same. Analysts also worry that the EU’s common long-term budget, which will be hammered out in the coming weeks, is also threatened by cuts in growth-friendly areas.
Meanwhile, at their meeting, ministers also approved steps that would allow 11 EU countries to impose a tax on certain financial transactions such as the sales of stocks. The goal is to force the financial sector to contribute to the economic cleanup given that the highly risky trading activities of banks contributed greatly to the crisis. But many critics say that while this is a noble idea, it won’t work because the levy will likely move transactions to untaxed locations.
Supporters of the tax also argue that it would bring more stability to financial markets. But many observers say there is no evidence to back this claim. They say it is not immediately clear how the tax can reduce the systemic risks that caused the meltdown in 2008.