The Joplin Globe, Joplin, MO


May 8, 2012

Brussels, Berlin tell Europe to stick to austerity

BRUSSELS — Germany and the European Commission on Tuesday called on EU nations to stick to their agreed budget cuts despite mounting voter discontent, but promised some new efforts to boost growth to alleviate economic hardship.

In elections on Sunday, voters in France and Greece gave strong support to parties who want to roll back or slow down the spending cuts and tax increases that have defined Europe’s response to its debt crisis.

That added to cries from labor unions and some governments for more measures to boost economic growth to offset the devastating impact on jobs that austerity measures are having.

Officials in Berlin and Brussels said there was some room for more reforms to help growth, but insisted that any new growth policies must not detract from Europe’s drive to lower its deficits.

European Commission President Jose Manuel Barroso said there could be no fundamental change in direction.

“What member states have to do is be consistent, implementing the policies that they have agreed,” Barroso told reporters on the eve of Europe Day, which celebrates the ever closer cooperation between the nations of the Continent. “Now, the key is implementation.”

On Sunday night, however, the calls from some European capitals were different, with French socialist president-elect Francois Hollande vowing that “austerity can no longer be inevitable.”

In Greece, parties that rejected belt-tightening made big gains and there were fears that the new leadership would renege on commitments made to secure the country’s massive rescue loans. An outright rejection of the bailout could eventually see Greece leave the euro currency bloc, a possibility that was unnerving financial markets.

As the debate over austerity intensified, EU President Herman Van Rompuy called for an informal summit of the 27 EU government leaders on May 23 to discuss economic growth and to prepare for a summit in June focused on job creation.

Barroso discounted the notion that Europe was going to revise its fiscal policy commitments.

“It would be completely demagogical and not serious to propose to some of our member states to relax now the efforts of fiscal consolidation,” he said.

He insisted that sustained debt reduction was essential to convince markets, build confidence and cut borrowing costs. “Every euro spent on interest payments is a euro less for jobs and investment,” he said.

Germany largely backed the Commission’s stance of staying rigid on fiscal restraint while seeking concerted measures for growth.

“The end of the debt policy has been agreed in Europe. It has to stay that way,” said German Foreign Minister Guido Westerwelle in Berlin.

Like Barroso, he suggested that economic growth could be enhanced, but through structural reforms — not through increased government spending.

“It’s right that we are simultaneously creating new growth impulses. That’s why we have to add to the fiscal pact for less debt a growth pact for more competitiveness.

“I’m very confident that we will be able to overcome the crisis this way with less debt and more growth. Both belong together,” he said.

The debate on the policies should come up at the May 23 summit, the first for newly elected President Hollande.

Outgoing president Nicolas Sarkozy and German Chancellor Angela Merkel worked closely together to set the EU course out of the financial crisis. Now, Hollande comes in with his own agenda.

He said his first act as president will be to write a letter to other European leaders calling for a renegotiation of a budget-trimming treaty aimed at bringing the continent’s economies closer together — a stance that puts him at odds with Merkel.


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