Euro zone core must focus on investment: new EU growth czar

Thu Oct 9, 2014 2:56pm EDT
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By Jan Strupczewski

WASHINGTON (Reuters) - Germany, France and Italy must focus on public investment to boost economic growth, the European Union's incoming top official responsible for growth and jobs said on Thursday.

Jyrki Katainen, who will take over as the European Commission's vice president for jobs, growth, investment and competitiveness on Nov. 1, told Reuters many countries have cut investment too much as part of efforts to consolidate budgets

"Countries like Germany, running current account surpluses, can afford to invest more, not only because it would stimulate the economy of the European Union, but because they need to take care of their future economic growth," Katainen said in an interview on the sidelines of the IMF and World Bank fall meetings in Washington.

German investment has been falling steadily over the past two decades, from around 21 percent of its GDP in the late 1990s to just above 17 percent now, according to the Center for European Reform think thank.

Yet Berlin, pursuing a goal of a balanced budget, is reluctant to increase public investment.

"A country that is strong at the moment does not necessarily have to be strong in the future, so you need to take care of the growth, strengthen the industrial base," Katainen said.

"Our message is that the surplus countries should invest in their future," he said, pointing to research and development, and infrastructure as the main areas for investment.

Katainen said France and Italy also needed to spend more on public investment, but, unlike Germany, could not simply increase borrowing for that purpose because their deficits and debts already were too high.   Continued...

European Jobs, Growth, Investment and Competitiveness Commissioner-designate Jyrki Katainen looks on before addressing the European Committee on Economic and Monetary Affairs at the EU Parliament in Brussels October 7, 2014.  REUTERS/Yves Herman