Reducing taxes on labour is a "clear political priority," finance ministers of the Eurogroup said Friday in Milan, adding that principles on achieving that goal have been established. Ministers must also commit to more ambitious structural reforms to encourage growth, European Central Bank President Mario Draghi told the meeting. Measures that the ECB is taking to try to encourage growth will have a far larger impact and yield greater "dividends" if they are matched by significant structural reforms by governments, Draghi said.
The ECB chief has also urged governments to do more to foster public and private investment, a point accepted earlier in the day by German Finance Minister Wolfgang Schaeuble.
He acknowledged on the sidelines of the Eurogroup session that his country, like other European nations, needs to adopt measures that will foster increased investment.
"We are in an economic environment that requires a strengthening of investment in Europe, Germany included," Schaeuble said.
But sustainable growth also demands that governments better control their spending and reform fiscal policies, said Schaeuble, a strong proponent of strict adherence to the regulations in the European Union's Stability and Growth Pact.
Draghi called that pact "an anchor of trust" and told the ministers they must not forget their hard work of the past to improve their financial balance sheets and must respect the stability pact.
But there is sufficient scope in the stability pact to allow member States some wiggle room in their financial plans, Italy's Spending Review Commissioner Carlo Cottarelli told a business audience in Perugia earlier Friday.
The government of Premier Matteo Renzi has been urging the EU to exclude some types of spending, especially big-ticket, long-term infrastructure investments, from its measures of whether countries are following its finance rules. "I think there is room for flexibility on the margins (of the European stability pact) that can be exploited," Cottarelli said.
Eurogroup President Jeroen Dijsselbloem said that ministers must first respect the rules of the stability pact, reduce debt and deficits, and only then can they expect to make use of flexibility in the rules.
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