Old remedies won't work

The annual meeting of the International Monetary Fund and the World Bank demonstrated it once again: Europe is the problem child of finance ministers and central bank governors of all 188 member nations. But what prescription to give the ailing patient is still the subject of plenty of arguments - some of which are played out in front of the camera, some behind closed doors.

Mario Draghi, the head of the European Central Bank, is currently trying out the plan proposed by the American Federal Reserve: Stimulate the economy by driving interest rates down close to zero and buying up bonds. But a number of economists think that's the most dangerous option.

No one can seriously deny that, especially when Jens Weidmann, president of the Bundesbank, Germany's central bank, has warned that lower interest rates and enormous floods of money could create a dangerous chase for profits that will drive investors to take ever-greater risks - until the next bubble bursts.

Schäuble: Europe's austerity commissioner

On top of that, the difference in interest rate policy in the eurozone on the one hand, and that of the US and the UK on the other, is itself potentially dangerous. While the Fed is slowly turning off the money tap, Draghi's program is about to reach its climax. That means the movement of huge amounts of capital, which will presumably cause significant difficulties to developing countries, who have profited well from their foreign investments.

The second option is the one recommended by IMF chief Christine Lagarde and US Treasury Secretary Jack Lew: Europe's governments shouldn't keep following the advice of its "austerity commissioner" - German Finance Minister Wolfgang Schäuble - but should stimulate demand with state intervention and higher deficits. Particularly countries with high export surpluses - in other words, Germany - should do more to drive demand, they say.

The idea sounds good - except for one catch. Most eurozone countries don't have the financial resources to make investments large enough to sustainably generate growth and jobs. But if they're allowed to begin taking out loans again, it will destroy their budget discipline and endanger their reform programs - and soon enough we'll be back at the start of the euro crisis.

No alternative to reform

Only Schäuble could release between 10 and 20 billion euros ($12 - $25 billion) without endangering Germany's debt cap. He said in Washington that he was prepared to finance any workable growth projects - a promise that's easy for him to make, because it will be years, if not decades, before any German projects will be ready to implement. And even if there are enough projects, it doesn't mean Germany's European neighbors will profit from them.

That leaves a third option - the toughest, but also the most sustainable: to finally take on the necessary structural reforms and improve the opportunities for growth and employment. That could increase the potential for growth and competitiveness - making the job market more flexible, decreasing taxes to create more jobs and making Europe more attractive for foreign investors.

Of course, these demands have existed for some time - the IMF has been making them too. But they require tough intervention and have met with bitter resistance, especially from Italy and France. But there is nothing for it. In the long run, neither new loans nor new flows of money will cover the necessity for structural reforms. Budget and fiscal policy are increasingly reaching their limits - what we need is serious reform. And this must be demanded now - not just in front of the TV cameras, but behind closed doors, where things really matter.