Europe Poised to Soften on Austerity

New Italian government may unwind some budget measures.

Europe may accelerate a shift away from its austerity-first agenda this week as the new Italian government changes course and a German-Spanish investment pact underscores a renewed focus on combating record unemployment.

Yesterday’s swearing in of Italian Prime Minister Enrico Letta ends a political deadlock nine weeks after voters rejected the country’s budget-cutting course. German Finance Minister Wolfgang Schaeuble, a champion of austerity, will travel to Spain today to unveil a plan aimed at spurring investment in Spanish companies. Later this week, the European Central Bank may also cut interest rates at a meeting.

Policy Limits

“We are reaching the limits of the current policies,” Barroso told an audience in Brussels a week ago.

Job Cuts

To be sure, austerity measures continue in crisis-stricken euro nations. Greek lawmakers passed a bill late yesterday including plans to fire 15,000 workers by the end of next year as the government of Prime Minister Antonis Samaras cleared the latest hurdle to receiving international aid payments.

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