“European finance ministers opened the way for looser budget policies after a backlash against austerity thrust Italy into political limbo and shattered months of relative stability in European markets.
Italy’s deadlocked election, France’s refusal to make deeper budget cuts and protests against the shrinking of the welfare state across southern Europe escalated the rebellion against the German-led prescription for fighting the debt crisis.
Economic strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” European Union Economic and Monetary Commissioner Olli Rehn told reporters late yesterday after a meeting of euro- area finance ministers in Brussels.
The euro-zone economy will shrink 0.3 percent in 2013, making for the first annual back-to-back contraction since the currency’s birth in 1999, the European Commission forecast last month. The currency-bloc prediction masked a widening north- south divide, with growth in countries like Germany,Finland, Belgium and Luxembourg set against dwindling output in Italy, Greece, Spain and Portugal.
France is straddling the middle, set to eke out a 0.1 percent expansion after the economy stagnated in 2012, according to the commission. Deeper budget cuts are out of the question, French Finance Minister Pierre Moscovici said.
