No easy way out

Growth is the new magic formula in Europe. So growth was the major issue at the EU's special summit. The initiators are selling the growth idea as if it were something entirely new, a magic potion against the crisis. And they put the concept into a fatal conflict with a policy of consolidation.

It is understandable that austerity and reform tend to lead to protests than applause in Athens, Lisbon or Madrid. But, except in Athens, the painful path of cuts and austerity has been generally accepted.

With the election of the new French President Francois Hollande, though, the wind has turned. Now everyone who never really liked the austerity policies feel they have growing support. They claim that, obviously, saving has brought no benefit - in fact they suggest that it has actually made the crisis worse. And they present growth as the new policy which will finally get the EU out of its crisis.

Growth? Sure, but how exactly?

Certainly, no one - including German Chancellor Angela Merkel - has anything against growth. But politicians mean different things when they use the term.

There's a major difference in whether growth results from reforms that make a country more competitive or whether it results from public money pumped into domestic consumption. That just rakes up even more public debt, without getting the economy into better shape. But it's the second option which is the aim of some of the current proposals.

No one-sided solidarity

The same goes for eurobonds. A single interest rate for common bonds is very attractive for governments in trouble - just as it is undesirable for strong economies. Why should Spain or Italy continue their reform efforts if they no longer have the pressure of mounting interest rates on their government bonds? The bill would be footed by the strong economies like Germany. For Berlin, the interest rate it would have to pay on bonds would rise.

Germans have brought their economy in shape through painful reforms and low wages. After years of effort, they are now harvesting the fruit. And they are largely willing to help the weaker economies - but only if they can be sure that those countries are serious about their own reform efforts. Where's the politician who would want to try to explain to the German public that they must guarantee other people's debts, just so that they can go on living above their means?

Standing firm

The special summit has not brought any results. It was only the prelude for the crucial summit in June. But it has shown that the mood has changed and the power has shifted.

Merkel faces increasing opposition to her policy of strict consolidation and budget discipline. But she must stick to her convictions, even without French support. It's a rocky path but the only one which is likely to lead to success.

Author: Christoph Hasselbach, Brussels / ai
Editor: Michael Lawton