Italy Leads Eight-Nation Push for EU to Change Budget Analysis
- Letter to EU commission seeks review of `output gap' estimates
- Change could make it easier for nations to counter downturns
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Italy, Spain and six other euro-area nations want the European Commission to change its methods for analyzing budgets so that countries can spend more in a downturn, according to a March 18 letter seen by Bloomberg News.
Finance ministers from the eight countries said the EU should rethink how it calculates the “output gap” -- the difference between a country’s actual and potential economic growth -- which helps determine how much of a country’s budget deficit is considered structural and subject to euro-area limits. At the moment, nations commonly calculate the gap over four years, while the EU uses a two-year horizon.