November 29, 2016 / 1:45 PM / a year ago

Germany's Gabriel warns of costs of rigid EU budget rules

BERLIN, Nov 29 (Reuters) - German Vice Chancellor Sigmar Gabriel said on Tuesday that insisting on rigid budget rules in the European Union could inflict major political damage, taking a position on fiscal policy opposed to that of Finance Minister Wolfgang Schaeuble.

“One should sometimes ask the question: ‘is the political damage that we are inflicting worth what is being pursued in terms of austerity politics,” Gabriel said at an event in Berlin.

The leader of the Social Democrats, junior coalition partners to Chancellor Angela Merkel’s conservatives, said the European Commission could allow budget deficit leeway for some member states on the condition that they implement structural reforms.

The Social Democrats favour fiscal stimulus as a means to spur growth and fight high unemployment in some EU member states, a policy opposed by Schaeuble who has rejected the European Commission’s call for fiscal stimulus. (Reporting by Gernot Heller; Writing by Joseph Nasr; Editing by Madeline Chambers)

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