It is frustrating that there was yet another Council meeting in Brussels and again none of the necessary steps were taken. Angela Merkel basically got what she wanted. Apart from Britain and the Czech Republic everybody looks set to sign up to her fiscal union, which will set in stone a constitutionalised version of the Stability and Growth Pact. Mental note, this was the same Pact that failed to prevent the current crisis to start with. The statement of the European Council claims the following:
Over recent months, there have been tentative signs of economic stabilisation but financial market tensions continue to dampen economic activity and uncertainty remains high. Governments are undertaking strong efforts to correct budgetary imbalances on a sustainable basis but further efforts are needed to promote growth and employment. There are no quick fixes. Our action must be determined, persistent and broad-based. We must do more to get Europe out of the crisis.
Tentative signs of stabilisation? DER SPIEGEL presented a different story yesterday:
The effort to rescue Greece is clearly moving in circles, and there is no evidence of any progress. Ironically, only three months ago European leaders believed that things were already on the mend. Greece’s private creditors were supposed to abandon half of their claims, and the partner countries planned to contribute another €130 billion ($172 billion). These efforts were expected to bring the country’s debt level from more than 160 percent of gross domestic product (GDP) to a more tolerable 120 percent by 2020. But these hopes were deceptive. The Greek economy is shrinking faster than European politicians believed was possible in autumn, and now the country is short on funds once again.
The most disappointing aspect of the summit, however, is the complete failure to come up with the promised strategy for growth. Instead of a coordinated investment programme necessary to compensate for the shortfall in aggregate demand, the message is never-ending austerity (see above) and the usual lofty talk about structural reforms, new trade agreements, abolishing red tape, …
Growth and employment will only resume if we pursue a consistent and broad-based approach, combining a smart fiscal consolidation preserving investment in future growth, sound macroeconomic policies and an active employment strategy preserving social cohesion.
The real world, however, looks more like this: a narrow approach based on brutal fiscal austerity regardless of the consequences, absolute lack of investment in anything, completely misguided macroeconomic policies, rising unemployment and the explosion of social cohesion. Therefore nothing new from Brussels, but reality will inevitably catch up – even with the Council – at some point.