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EU seeks billions of euros to revive economy

EU finance ministers have tasked teams with drawing up a list of projects to create growth.

FILE. EU finance ministers have tasked teams with drawing up a list of projects to create growth. Picture: AFP

MILAN - The European Union sought ways on Saturday to marshal billions of euros into its sluggish economy without getting deeper into debt, considering options from a pan-European capital market to a huge investment fund.

With Europe's economy struggling to recover from the worst financial crisis in a generation, EU finance ministers tasked the European Commission, the EU executive, and the European Investment Bank (EIB) to draw up a list of projects that would create growth and decide how to finance them.

"We have given a mandate to the Commission and the EIB to swiftly present an initial report on practical measures that can be taken, on profitable investment projects that are justifiable," Italy's economy minister, Pier Carlo Padoan, told a news conference.

Ministers are expected to discuss the projects and investment tools at their next meeting in Luxembourg in October.

There were no details of what those projects might be.

To finance them, the ministers discussed four ideas: an Italian paper on new financing tools for companies, a Franco-German proposal on how to boost private investments, a Polish proposal on creating a joint EU fund worth 700 billion euros and a call from incoming European Commission President Jean-Claude Juncker for a 300-billion euro investment programme to revive the European economy.

The European Central Bank's plan to resurrect a market for asset-backed securities would be another financing tool.

"We don't have a magic wand but we need growth, we need to stimulate demand without taking on debt," France's finance minister, Michel Sapin, told reporters after the gathering in Milan. "We need the right mix of public and private money."

The European Union's economy, which generates about a quarter of global output, grew by just 0.1 percent last year and its jobless rate is almost double that of the United States, with around 25 million people unemployed.

Investment is the new buzz word among ministers, overriding the German mantra of budget cuts. Germany is under pressure from France and Italy to loosen the fiscal reins and use its overflowing government coffers to ramp up public investment.

German Finance Minister Wolfgang Schaeuble strongly supports the search for investment, but this week rebuffed calls for Berlin to spend more to boost the euro zone economy, which showed no growth in the April-to-June period.

The euro zone will grow again in the third quarter but full-year growth will be below 1 percent, ECB Vice President Vitor Constancio said after the meeting.

In a speech to the EU finance ministers in Milan on Thursday, ECB President Mario Draghi described business investment as "one of the great casualties" of the financial crisis, saying it has fallen 20 percent since 2008.

"We will not see a sustainable recovery unless this changes," he said.

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