Main focus of Friday, March 2, 2012

Europe forces itself to economise

According to Van Rompuy, the fiscal compact will bring the euro "back into safe waters". (© dapd)

With the exception of the UK and the Czech Republic, the EU heads of state and government have signed the fiscal pact for more budget discipline at their summit meeting today, Friday. But piling cuts upon cuts is unsocial, commentators write, expressing fears that the pact could jeopardise growth in Europe.

Fiscal compact threatens growth

The new fiscal pact commits the EU states to more budget discipline. However the economists Jérôme Creel, Paul Hubert and Francesco Saraceno argue that this will be counterproductive in the left-liberal daily Le Monde: "If these rules are applied on the short term, a recession will be inevitable. That means that the heads of government will be forced to dissociate existing laws from their practical application when it comes to budgetary policy. If the ultimate goal of economic policy is to preserve stability and economic growth, the best thing would be to leave budget sinners unpunished.  ... Europe's governments, the ECB and the Commission seem to consider reducing public debt and deficits as political objectives in themselves, rather than as an instrument for attaining goals such as growth and inflation. This reversal of objectives and instruments boils down to denying any role for macroeconomic policy." (02/03/2012)

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All available articles from » Jérôme Creel, » Paul Hubert, » Francesco Saraceno
Who's saying what » Ways out of the debt crisis

More austerity not an option

More austerity is almost impossible, the business paper Il Sole 24 Ore writes, and doubts that the fiscal pact will help increase the Eurozone's credibility with financial markets: "At the bottom of their hearts many heads of government know that it will be difficult to impose more austerity measures on their countries. The social consequences are almost unbearable in the crisis. But how can they be less demanding without losing their credibility on the financial markets once more? Is it cleverer to formulate higher goals in the knowledge that they won't be attained? Or would it be wiser to set them lower and try to complement them with convincing reforms? A real decision can't be expected today. Only a preliminary decision - for the higher goals." (02/03/2012)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Financial Markets, » Europe
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Who's saying what » Ways out of the debt crisis

Summit of false satisfaction

The heads of state and government of the 27 EU countries seemed all too self-satisfied as the EU summit kicked off on Thursday, according to the business paper Hospodárske noviny: "Everything is fine: Europe is calmer, the Greek problem has been solved, the Euro firewall is being raised higher, the fiscal compact doesn't have to be signed by all the states. The rejection of the pact by the UK and Czech Republic is being tolerated, and the same goes for the Irish referendum. In Italy it sufficed to replace Berlusconi with Monti for everyone to practically forget what a huge mountain of debt the country is saddled with. The collective downgrading of a number of European countries by the rating agencies, as well as the continuing problems of Greece, Portugal and Spain, are being ignored. The voices of protest on the street are not penetrating to the conference hall. Everything the EU has produced in recent times is just wonderful. But most of it exists only on paper." (02/03/2012)

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Who's saying what » Ways out of the debt crisis

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