Eurozone finance ministers, led by Germany and the Netherlands, today scrapped a European Commission proposal for richer countries to spend more in order to boost a lacklustre European economy.
The Commission, the EU's executive arm, last month tabled unprecedented plans that would have compelled states with strong enough public finances to loosen the purse strings after years of austerity.
Eurogroup head and Dutch Finance Minister Jeroen Dijsselbloem said national governments had refused to endorse the Commission's recommendation that they spend the equivalent of 0.5 per cent of annual economic output to boost the economy.
"We believe that a number of countries are moving in a much more favourable fiscal position and that opens up opportunities to prioritise investments - in the Netherlands we will do so, I'm sure," Dijsselbloem said after the ministers discussed the proposal in Brussels.
"But putting a figure on that or making that a target has not been agreed by the Eurogroup," he told a press conference.
Germany, the Netherlands and Luxembourg are rare examples of governments in Europe with full enough coffers to consider higher spending while still remaining within EU rules on budget deficits and debt.
The Commission argued that easing up on the fiscal austerity imposed to help beat the debt crisis is increasingly vital given the rise of populist and extremist parties in Europe that are riding a wave of frustration with Europe's low growth and high unemployment economy.
Economics Affairs Commissioner Pierre Moscovici, the former French finance minister who announced the fiscal expansion proposal, acknowledged defeat.
"You are always disappointed when your point is not taken but you are always satisfied when you see that the economic and political reasoning is progressing," Moscovici said in a joint press briefing with Dijsselbloem.
Germany is the most powerful member of the eurozone and it had been expected that powerful Finance Minister Wolfgang Schaeuble, a stickler for balanced budgets, would put a firm veto on the plan.
"The topic is no longer on the table," an EU diplomat said after the talks.
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