Spend now to rescue economic growth, Dombrovskis says

Commissioner calls on Germany and other countries to counter a slowdown.

European Commission Vice President Valdis Dombrovskis Thursday urged governments to spend now to boost eurozone growth after monetary policy has struggled to stimulate business.

The Latvian issued the call as part of the Commission’s latest economic forecast, which downgraded projections made in July for both 2019 and 2020.

Eurozone gross domestic product is now set to come in at 1.1 percent this year, then 1.2 percent in 2020 and 2021. In July, Brussels said GDP would increase by 1.2 percent this year and 1.4 percent in 2020.

Uncertainty from Brexit and global trade tensions between the U.S. and China are chiefly to blame for the downturn.

Dombrovskis especially called on countries with extra cash, such as Germany and the Netherlands, to start spending to counter the slowdown.

“Those Member States that have fiscal space should use it now,” Dombrovskis said in a statement. “I urge all EU countries with high levels of public debt to pursue prudent fiscal policies and put their debt levels on a downward path.”

Eurozone gross domestic product is now set to come in at 1.1 percent this year. In July, Brussels said GDP would increase by 1.2 percent this year.

The calls come almost two months after the European Central Bank cut its target interest rates deeper into negative territory and restarted its multi-trillion-euro bond-buying program to boost prices and stave off an economic downturn.

The Commission projected eurozone inflation of 1.2 percent this year and next, rising by 0.1 percentage points in 2021.

That’s far below the ECB’s inflation target of just under 2 percent, giving the Frankfurt-based institution little reason to change its policies anytime soon.

Unemployment stands at its lowest level since the start of the century and is forecast by the Commission to keep falling to 7.3 percent in 2021.

This article has been updated.