Taking growth on board

The G8 summit held this past weekend in Camp David, near Washington, addressed various problematic aspects of international reality; but what was particularly expected of the meeting was a clear pronouncement on the need to complement, with some measure of growth-oriented policies, the extreme austerity measures being relentlessly applied in the euro zone. And indeed at the beginning of the communiqué, the G8 admits, almost five years after the onset of the crisis, that its imperative priority is the promotion of growth and employment. This constitutes a rather tardy admission of the manifest failure of the extreme austerity policies.

There has, however, been no convincing or concrete commitment forthcoming in favor of this priority — which, in political terms would give us to understand that either the German chancellor Angela Merkel had voluntarily reconsidered her demands imposed on the economies in greatest difficulties, or that the pressure of her colleagues had caused her to yield ground.

The world economy is still the prisoner of hesitant policies in which, just as was the case at the beginning of the Great Depression, no one seems capable of distinguishing between what is urgent and what is important: that is, of seeing the urgency of the need to combine the objectives of bank restructuring with that of compensation for the weakness of private demand in the economies hardest hit by the crisis.

In the United States, where the crisis first emerged, these twin objectives have been partially achieved, but the euro zone is now going through one of its most difficult moments. In a number of national economies recession has set in, with unemployment still on the rise and ongoing financial stresses reminiscent of the worst moments of the crisis, when Lehman Brothers went bankrupt. The rigid priority being accorded to budgetary adjustments, which can hardly be attained in the absence of growth, as well as the deterioration of financial stability, is generating growing irritation among the public, and increasingly serious threats to the very cohesion of the monetary zone.

Investment as insinuation

 The G8 group’s expressed desire to keep Greece within the single-currency zone is not, however, very enthusiastically backed by the population of that country. The question of issuing a call to generate programs of investment in education and infrastructure has amounted to little more than an insinuation.

The G8 summit, then, appears to have taken note of the situation rather than committing itself to doing anything about it. In the absence of prompt and significant measures to stimulate growth, and of a greater readiness on the part of the European Central Bank to reduce financial instability, general economic growth will remain in suspense and the threats of protectionism warned of in the G8 communiqué will take on a more solid shape.