Europe needs growth, now

Almost everyone, even outside Europe, is now speaking of the urgent need to launch an EU-wide policy of growth; but behind this term lie very different proposals. The state and government heads of the 27 member states will be meeting at a dinner on May 23 to prepare the decisions that must be made on June 28. This will be the first EU meeting for François Hollande, one of the chief promoters of such a policy, coming only a week after he accedes to the presidency of the French Republic, and then meets the German chancellor.

Europe cannot afford another mistake. To finance growth and employment, it will not be enough, as Germany seems to intend, to repackage the existing funds or unspent budget allocations. Nor will the idea (a good one as well) that the European Investment Bank might endorse bonds for private investment in major projects be sufficient. Merkel is adamant that the new plan must not derail the austerity plans or the Fiscal Pact, “which is not negotiable.”

The latter, however, while ratified by at least 12 of the 25 signatory states, will not have immediate effects; it will only bear fruit in a timeframe of five to seven years. And we cannot wait that long for growth to begin to happen. Without prospects of growth, Europe may begin to sink economically, and, as we have just seen in Greece, politically. Nor will the necessary structural reforms in almost all the EU countries generate growth in the short term. Action is needed, and soon, and it must focus on two factors, without which any plan will not be worth the paper it is written on. On the one hand — as the European Commission has already begun to insinuate — the period that the most problematic countries have to reduce their deficit to three percent must be extended, by at least a year. This will allow for less dramatic adjustments. On the other hand, a more aggressive policy on the part of the European Central Bank is needed — although Germany is reluctant, given that there is no consensus as of yet on euro bonds. Other strategies may be put on the table, such as Germany boosting consumption by raising wages — something about which Finance Minister Schäuble appears to be receptive.

Spain, with 5.6 million people out of work, in recession and with a financial sector that needs an injection of funds, is one of the economies that would most benefit from a growth-oriented EU plan. However, Rajoy maintains a worrying silence in this respect. He ought to set forth his ideas, if he has any. And if he were to reach a pact with the opposition before going to Brussels, his position would be strengthened.

The prime minister must set aside his daydreams of how, by holding to strict orthodoxy, Spain might substitute François Hollande’s France as Germany’s preferential partner. The Berlin-Paris axis is, and will remain, central. Though it may not be the only one: the EU and the euro zone must return to broad consensus and to the EU institutions. This, and a plan for growth, is what Spain’s priority interest must be.