Magazine article New Statesman (1996)

Merkel Says "Nein" but Europe Urgently Needs a Plan for Growth

Magazine article New Statesman (1996)

Merkel Says "Nein" but Europe Urgently Needs a Plan for Growth

Article excerpt

Since the economic crisis began, the response from European nations has been defined by austerity, often with disastrous results. Growth has collapsed and unemployment has soared as countries have locked themselves into a spiral of spending me cuts, low growth and higher borrowing. The lesson of the 1930s - that you can't cut your way out of a recession - has been forgotten.

Now, after two years in which European Union leaders have missed innumerable opportunities to resolve the crisis, the voters have delivered their verdict. In Greece, now in its fifth year of recession, the bailout parties have been rejected, pushing the country ever closer to the euro exit door. In Germany, the governing Christian Democrats have lost power in the first of the country's state elections. In France, voters have abandoned Nicolas Sarkozy in favour of Francois Hollande, the country's first Socialist president in 17 years. The only discernible pattern is one of anti-incumbency; Mr Sarkozy was the eighth eurozone leader to be toppled in little over a year. European voters, who accepted austerity in theory, have rejected it in practice.

It was to them that Mr Hollande addressed his victory speech, in which he declared that "austerity need not be Europe's fate". Such bold rhetoric disguises his essentially moderate stance. Mr Hollande has pledged to eliminate France's budget deficit by 2017, just a year later than Mr Sarkozy did. Mindful of the fate of France's last Socialist president, Francois Mitterrand, who spent freely and was forced to U-turn by the bond markets, he will limit, rather than abandon, fiscal restraint. In the EU, however, where deficit reduction has crowded out all other economic imperatives, Mr Hollande's approach could prove transformative.

Throughout his campaign, he vowed to renegotiate the German-scripted "fiscal compact", which precludes the Keynesian expansionism needed to prevent a prolonged recession. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.