BRUSSELS: Eurozone finance ministers discussed yesterday a document that calls for a more growth-friendly fiscal policy, a move that could lead to Germany's spending more as fears of a downturn grow amid uncertainty from the coronavirus outbreak. The 19-country eurozone has for years stuck to a "broadly neutral" fiscal policy in its annual recommendations, despite repeated calls from the European Central Bank and slow-growth states for it to invest more. But weak growth last year in Germany, the bloc's largest economy, and fears of a new downturn, fuelled by the coronavirus outbreak in China, are pushing Berlin to soften its stance.

Until now, Germany has preached austerity to reduce fiscal imbalances in high-debt countries, like Italy and Greece. "If downside risks were to materialize, fiscal responses should be differentiated, aiming for a more supportive stance at the aggregate level," the European Union document says, confirming a Reuters report earlier in February.

China's coronavirus outbreak is among the main downside risks facing the eurozone economy, according to forecasts released last week by the European Commission. Eurogroup chief Mario Centeno yesterday said the effects of the coronavirus outbreak on the European economy would be short-lived despite its big impact on China. "We expect it to be a temporary effect," said the Portuguese finance minister who also chairs the monthly meetings of his eurozone counterparts. "We must be concerned with that, but we also need to look at the more long term prospects of growth

Centeno said before the meeting that the outbreak's effects on the eurozone economy were expected, at present, to be "temporary", but he said constant monitoring was necessary to gauge its long-term impact. Italian Finance Minister Roberto Gualtieri told reporters it was too early to gauge the economic impact of the coronavirus. Regardless of the virus, Gualtieri said "data of the last quarter of 2019 confirm the need that we have at euro area level a supportive fiscal policy, supportive to growth and in particular to investments".

In the last three months of the year, the German economy stagnated due to weaker private consumption and state spending, data showed last week, renewing fears of a recession. The EU document stresses that higher spending would need to comply with EU fiscal rules which mandate deficits below 3 percent of gross domestic product, among other requirements. It is also not clear how the euro zone defines a downturn that would trigger more expansionary policies.

The ultimate decision on turning the recommendation into more spending lies entirely with national governments. "We are prudent in our estimations of the disease in China and if that impact will be limited to some decimals of GDP for China, so very limited impact and for Europe, or if it will be bigger," Gualtieri said as he arrived for talks.

Last week the European Commission maintained its eurozone growth forecast at 1.2 percent for 2020, but warned the new coronavirus outbreak could yet hit the economy. The EU's executive said that the outbreak was a new threat to growth in Europe, but expected it would peak in the first quarter. - Agencies