March 6 (Bloomberg) -- European Union leaders will press ahead with budget-cutting efforts next week as they search for ways to ease economic strains, according to draft conclusions for a March 14-15 summit in Brussels.
“Substantial progress is being made toward structurally balanced budgets and must continue,” according to the draft, which was prepared March 4 and obtained by Bloomberg News. EU nations are urged to adopt an “appropriate mix” of tax and spending measures that includes short-term support for investment and youth employment.
Leaders will also call for completion in “the coming weeks” of deliberations on how the European Central Bank will assume oversight of euro-area lenders, according to the document. They will seek to wrap up proposals to make bondholders pay a greater share of bank-failure costs by June, and they’ll endorse efforts to design a central EU agency to handle troubled financial firms.
At the summit, leaders will confront what the European Commission projects will be the first ever back-to-back annual contraction for the euro-zone economy since the common currency’s 1999 debut. The 17-nation currency bloc is projected to shrink 0.3 percent in 2013 after a 0.6 percent contraction last year.
Countries like Germany, Finland, Belgium and Luxembourg have continued to grow while the financial crisis has wreaked havoc on nations like Spain, Greece and Portugal. France is straddling the middle, forecast to eke out a 0.1 percent expansion this year, while a backlash against austerity has thrust Italy into political limbo and shattered months of relative stability in European markets.
The EU leaders will renew their endorsement of new budget rules that are due to take effect later this year, according to the draft. The measures, now in the final stages of legislative approval, will give the commission expanded oversight powers that include an advance look at national budget policies before countries enact them, steps that are a central plank of the EU’s economic governance strategy.
“Continuing uncertainties on financial markets together with the stagnation of economic activity projected for 2013 and unacceptably high levels of unemployment emphasize how crucial it is to continue with these efforts as a matter of priority and to implement decisions taken,” according to the document.
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