Germany should spend more amid recession risks

HELSINKI, FINLAND — The German government should now look to ease its rules on fiscal spending in an effort to bolster its flagging economy, Valdis Dombrovskis, a vice-president of the European Commission, told CNBC Friday.”Germany currently is one of the countries where this (economic) slowdown is most pronounced. From that point of view, we think that indeed now it’s (a) very appropriate moment for Germany to look at possibilities to have this fiscal stimulus,” Dombrovskis said in Helsinki, Finland, ahead of a meeting with the 19 finance ministers of the euro zone.The topic of Germany’s spending, or lack of it, has come to the fore this summer as its economy has slipped near recessionary territory. European Central Bank (ECB) President Mario Draghi said Thursday that it was “time for fiscal policy to take charge” in a subtle hint to Germany and other nations like the Netherlands. But Draghi’s not alone, and many others have called for those countries with budget surpluses to invest and help reinflate a euro zone that has seen fragile growth fade in recent years. Speaking to CNBC in his first interview since being appointed for another five years at the European Commission, Dombrovskis added that the EU needs a “balanced approach.””We need to take into account questions of fiscal sustainability, particularly in high debt countries, but we also need those countries that have the fiscal space to use it to stimulate the economy, especially to stimulate investment,” he said.Draghi announced further stimulus measures Thursday for a region has been has struggled to grow since the height of the 2011 sovereign debt crisis. The central bank cut interest rates, eased lending conditions for banks and restarted the purchasing of governments bonds. Eight years on since the crisis first hit, euro zone growth is still moribund, inflation is persistently low and there are increased geopolitical risks, such as the U.S.-China trade war and the prospect of a no-deal Brexit.Valdis DombrovskisJohn Thys | AFP | Getty Images

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