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BRUSSELS — The European Commission will propose reforms to EU fiscal rules on Wednesday, hoping to strike a new balance between allowing members to invest to beat the slowdown while bolstering scrutiny of public accounts.

EU Economy Commissioner Paolo Gentiloni has said that now is the time to act on the issue.

The EU's Stability and Growth Pact seeks to put a lid on how much the bloc's member states can borrow, but was suspended in early 2020 to prevent the European economy crumbling under the COVID pandemic.

Rather than see the EU slip into a historic recession, Brussels allowed deficits to pile up.

But now the storm has passed and — despite added pressures on Europe from Russia's war in Ukraine — the pact is due to be reactivated late 2023.

A 25-year-old pact 

The stability pact was adopted by the EU countries belonging to its eurozone in 1997, ahead of the single currency coming into being two years later.

It responded to German concerns that, without it, some EU countries might pursue loose fiscal policies, weighing on all euro-using nations.

The basic constraints of the pact were that eurozone countries should not allow their public deficit to go above three percent of GDP, and debt would stay below 60 per cent of GDP.

If those ceilings were breached, the pact would trigger deficit-reining procedures that theoretically could have led to massive fines.

But those sanctions were never applied. Part of the worry was that they could drag down an already struggling EU country's finances, worsening its situation.

The eurozone crisis of 2008 — when Greece teetered at the exit door — also taught some tough lessons.

To bring back fiscal responsibility, it was decided that wayward countries should set out a plan to the European Commission on how it would bring debt back within the agreed lanes.

Any debt level above 60 per cent was to be reduced by one twentieth each year, but that measure too was considered unworkable as it could impose destructive austerity on indebted countries.

The pact also limited the "structural" deficit — taking into account cyclical corrections — to 0.5 per cent of the amount of debt exceeding the 60 per cent ceiling.

Any amount beyond that limit needed to be reduced by 0.5 percentage points per year.

Why a reform? 

Broadly, there are two camps in the EU.

One, termed the "frugals" and de facto led by Germany, believes the stability pact hasn't been applied strictly enough.

The other, including indebted southern EU countries such as Italy, whose debt is over 150 per cent of GDP, see the pact's straitjacket as too tight.

They think it penalises public investment at a time that European countries need to spend massive amounts to mitigate climate change, transition to a more digital future and rearm amid the Russian threat.

"These two sides which demand, on one hand, automatic rules, and on the other, more flexibility, are defining the outlines of the expected reform," said Andreas Eisl, a researcher at the Jacques Delors Institute.

Both camps criticise the current rules.

The new framework will be designed to be simpler and easier to put into action, with Gentiloni arguing that should aim to guarantee both "sustainable debt and durable growth".

The main proposal is to make EU countries sign on to a medium-term plan calculated on spending, rather than on debt levels.

That goal would be easier to scrutinise, while giving countries more room to manoeuvre on investment.

Brussels, though, would wield both carrot and stick. Respecting the new rules would unlock the possibility for adjustment over a longer term, while violations would usher in more severe limits.

Next steps 

The commission's announcement will present ideas to be discussed in early December when EU finance ministers meet.

The EU executive hopes they agree on an overhaul which would then be approved by a summit of EU leaders, to be followed by European legislation next year that should be adopted within two years.

If that timetable holds, Brussels should be in a position from 2024 to interpret existing rules in light of the coming reform.

But the process looks tricky.

"It's easy to agree principles," but the devil will be in the very technical details "which will determine just how constraining the rules will be", Eisl said.

DAMASCUS — One whiff of a fragrance is all Syrian perfumer Mohammad Al Masri needs to recreate the scent of a luxury brand — without the label and for a fraction of the cost.

Dozens of customers flock daily to his tiny store, nestled in the historic market of Damascus's old city, many flashing photos on their phones of high-end perfumes they want to replicate.

"All I have is my shop, and this nose I've been training since I was 15," the 55-year-old told AFP, pointing at his face. 

"I don't have a big workshop or high-end equipment."

After 11 years of brutal war and economic dislocation, most Syrians struggle to afford life's bare necessities, let alone perfume.

Before the war, Masri would mostly concoct expensive oriental fragrances, with heavy notes of oud, a sweet and woody scent, like his family has done for a century.

But after Syria plunged into conflict, demand for cheap imitations of premium brands skyrocketed and Masri's shop walls are filled with pictures of world-famous perfumes.

"For young women, perfume is essential, it's like food or water," said 24-year-old customer Cham Al Falah.

"I used to buy Western perfumes but I can no longer afford them because imported products are becoming increasingly hard to come by in Syria," she said while ordering a fragrance imitating her favourite Italian perfume.

Although Damascus has been spared the worst destruction of the war, which began after its government repressed peaceful protests, the local currency has lost almost 99 per cent of its value on the parallel market.

Syrian employees and civil servants reportedly make roughly $25 a month on average — a quarter of the price of a bottle of imported perfume. 

Masri sells his fragrances for about six dollars, drawing in a flow of clients from all walks of life.

Ahmad Dorra, 60, travelled from the mountain town of Zabadani, a 50 kilometre drive away, to buy five bottles of perfume for his family.

He watched as Masri lined up dozens of vials on a table — essences of jasmine, Damascus rose, musk and other fragrances used for his concoctions.

"I don't know much about Western brands," the farmer said, "but I trust [his] nose".

WASHINGTON — US job gains topped expectations in October, according to official data released on Friday, as hiring remained resilient and wages moved ever higher, underscoring the challenges in lowering rampant inflation.

The data comes days ahead of critical midterm elections, where decades-high inflation has propelled economic issues to the top of voters' minds and President Joe Biden faces a battle to avoid losing control of both chambers of Congress.

The figures will provide little comfort to the Federal Reserve (Fed), which has been battling to cool the economy, as policymakers fear high prices will become entrenched and rising pay will create an upward spiral — inflicting more harm on families and businesses.

American employers added 261,000 workers last month, far more than economists had forecast, though the pace was lower than the 315,000 increase in September, which was revised much higher than originally reported by the Labour Department.

The jobless rate rose two-tenths to 3.7 per cent, according to the closely-watched US employment report.

Biden cheered the data which showed 10 million jobs have been created since he took office in January 2020, but he recognised the hardship Americans face due to higher prices.

"Inflation is our top economic challenge... The global inflation that is raging in other countries is hitting us as well," Biden said in a statement on Friday.

He said policymakers will "do what it takes to bring inflation down".

Average hourly earnings for private sector workers jumped another 12 cents or 0.4 per cent last month, to $32.58, the report said.

Wages have increased 4.7 per cent over the last 12 months as firms have had to compete to find and retain workers in the tight labour market. 

That pace is slightly slower than in September, which the Fed will welcome, but many employees are pushing for increases to avoid losing ground to elevated consumer costs.

US markets rallied following the latest data, which raised hopes of a soft landing for the economy. Major indices closed higher on Friday, despite the Fed's pledge that interest rates will need to rise further to quell inflation.

'Softening' 

"The bottom line here is that the labour market is softening, but has not yet reached the point where the data are screaming at the Fed to stop tightening," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in an analysis.

But if employment trends continue, markets will start to push policymakers to "rethink the idea of continued hikes next year," he added.

The data showed notable job gains in health care, professional and technical services, and manufacturing.

The Fed has raised borrowing rates six times this year to cool demand, but there have been few signs it is having an impact on consumer spending or inflation.

The central bank said this week that it would have to continue hiking rates, although that has raised the risk that the world's biggest economy will suffer a downturn.

But Susan Collins, president of the Boston Fed Bank said she sees a chance to accomplish the task of reining in price increases without completely putting the brakes on growth.

While inflation so far is only slowly drifting down, "I do not believe a significant slowdown is required to accomplish our goal," she said in a speech in Washington on Friday.

But she stressed that the Fed must continue to act as "current levels of inflation are simply too high, and are taking a significant toll on households and firms".

While the policy tightening normally would be expected to lead to job losses, economists say employers are reluctant to shed workers that they struggled to find.

"The data are still showing strong positive momentum in the labor market which is not yet showing much adjustment in response to a rapid tightening of monetary policy," said Rubeela Farooqi of High Frequency Economics. 

"These data will keep the Fed on track to keep raising rates into restrictive territory," she said in an analysis.

BEIJING — German Chancellor Olaf Scholz told Chinese leaders in Beijing on Friday that Berlin expected equal treatment on trade as he tried to drum up greater economic cooperation despite growing distrust of the Asian superpower in the West.

Scholz is under pressure to push Beijing to get tough on Russia over the war in Ukraine, and he said on Friday that Germany and China had agreed they both opposed any use of nuclear weapons in the conflict.

The German chancellor is the first G-7 leader to visit China since the start of the coronavirus pandemic, which led the world's number two economy to close its borders and President Xi Jinping to largely eschew in-person diplomacy.

But his trip has prompted criticism at home over Berlin's growing economic reliance on Beijing, and sparked controversy for coming so soon after Xi strengthened his hold on power in China just last month.

Tensions are also running high between the West and Beijing on issues ranging from Taiwan to alleged human rights abuses.

Scholz held talks with human rights lawyers critical of the regime in Beijing ahead of the trip, a source in his entourage told AFP.

Received by a smiling Xi at Beijing's Great Hall of the People shortly after arriving, Scholz said he hoped to "further develop" economic cooperation — while alluding to areas of disagreement.

"It is good that we are able to have an exchange here about all questions, including those questions where we have different perspectives — that's what an exchange is for," Scholz said. 

"We also want to talk about how we can further develop our economic cooperation on other topics: Climate change, food security, indebted countries."

"Xi underscored the need for China and Germany, two major countries with great influence, to work together in times of change and instability and contribute more to global peace and development," Beijing's Xinhua News Agency reported.

Scholz also spoke with Chinese Premier Li Keqiang at a meeting in which he called for fair trade between the two countries. 

At a press briefing during which Chinese officials said there was "not enough time" for questions, Scholz urged Beijing to do more to "use its influence" on its ally Russia, currently engaged in a months-long war in Ukraine.

Both sides said they opposed the use of nuclear weapons in the conflict, with Scholz telling reporters: "Everyone says clearly that an escalation via the use of a tactical nuclear weapon is ruled out."

China has steadfastly avoided criticising Russia for invading Ukraine and instead blames the United States and NATO for the war.

'Keep doing business' 

The German delegation of more than 60 people was met on the tarmac at Beijing airport by a military guard — as well as health workers in white hazmat suits who conducted mandatory PCR tests in buses converted into mobile laboratories. 

Scholz's PCR test was taken in his plane by a German doctor he brought with him and supervised by Chinese health officials, according to the German government.

China's economic importance is seen by some in Berlin as more crucial than ever, as Germany hurtles towards a recession battling an energy crisis triggered by the Ukraine war. 

China is a major market for German goods, from machinery to cars.

But German industry's heavy dependence on China is facing fresh scrutiny after the over-reliance on Russian energy imports left it exposed when Moscow turned off the taps.

Scholz's approach is still underpinned by the idea that "we want to keep doing business with China, no matter what that means for the dependence of our economy, and for our ability to act", opposition lawmaker Norbert Roettgen told the Rheinische Post newspaper.

Concern about China has also come from within Germany's ruling coalition, with Foreign Minister Annalena Baerbock saying past mistakes with Russia must not be repeated.

'All the more important' 

There are also concerns that the trip — coming on the heels of Xi securing a historic third term at a Communist Party Congress last month — may have unsettled the United States and the European Union.

"For Beijing, this is less about concrete outcomes and more about the symbolism of the German chancellor paying Xi a visit so soon after the party congress," said Noah Barkin, visiting senior fellow in the Asia Programme at the US German Marshall Fund.

"It gives international legitimacy to his leader-for-life status, and it shows that China is not isolated," he added.

Berlin, however, says there have been consultations with key partners, and Scholz has insisted he is visiting China as a "European" as well as the leader of Germany.

In an article published before his departure, he said direct talks with Chinese leaders were "all the more important" after the long hiatus caused by the pandemic.

He promised to raise thorny topics such as respect for civil liberties and the rights of minorities in Xinjiang.

"We strongly agree with what he [Scholz]shared in that op-ed", including "encouraging President Xi to press President Putin on never using a nuclear weapon of any kind", US Secretary of State Antony Blinken said Friday after a meeting of G-7 foreign ministers in Germany.

FRANKFURT — Germany's Lufthansa said on Wednesday it remained interested in taking over ITA Airways, after the new Italian government signalled the bidding process could be wide open again.

Lufthansa in August lost out in the race to buy Alitalia's successor when the then-government led by Mario Draghi selected a rival bid by US investment fund Certares, Delta Airlines and Air France-KLM.

But a second chance could be looming, after the economy ministry on Monday announced the period of exclusivity talks with Certares and its partners had come to an end and would not be renewed.

The Lufthansa group "remains interested in the Italian market", a spokeswoman told AFP. 

"We are monitoring the further sale process of ITA and remain interested in a true privatisation of the airline."

The new hard-right government in Italy, led by Prime Minister Giorgia Meloni, came to power after elections in September. 

Meloni had previously urged Draghi to pause the ITA Airways negotiations while the new government took shape.

Air France-KLM for its part said it had "taken note" of the economy ministry's announcement that the exclusivity period had ended. 

"The group is evaluating its options in the Italian air transport market and awaits further information from the Italian state," it added. 

According to Italian media, the Certares consortium had proposed buying nearly 56 per cent of ITA for around 600 million euros ($599 million).

The Italian state would retain a 44 per cent stake and have two of the five seats on the future ITA board.

Lufthansa and Swiss-Italian shipping group MSC had proposed to pay 850 million euros for 80 per cent of ITA.

State-owned ITA Airways replaced the loss-making national carrier Alitalia, which was put under state administration in 2017, after years of fruitless attempts to find a buyer.

The Italian state has spent more than 13 billion euros trying get the national airline back on its feet.