PARIS – For better or worse, Europe is now engaged in an insurrection against the fiscal pact condemning European Union member countries to austerity without growth. Will it take a military coup to acknowledge that the situation is untenable? Or will the election of François Hollande as French President shift Germany’s uncompromising stance?
The prospect of reducing public deficits to less than 3% of GDP is unrealistic in both the Netherlands and Spain. Unless it is ready to take punitive measures now, the EU will have to give these countries additional leeway – mindful that the European public tends to respond negatively every time it is consulted. In Greece, the recent election produced no government, necessitating another popular vote in June.
Ireland is fortunately less worrying, but the odds that the fiscal pact will be approved in a popular referendum are becoming longer. Granted, the removal of the unanimity clause provides a way to avoid this obstacle and allow for the pact’s implementation. But this solves nothing, because neither France nor Italy will ratify the pact. Even Germany’s Social Democrats, whose support Chancellor Angela Merkel needs to secure ratification in the Bundestag, appear to have granted only conditional support.
Germany is accused of monetarist dogmatism and of being responsible for accentuating the economic asymmetry between it and its eurozone neighbors. Its relatively good economic health allows it to finance its debt at less than the rate of inflation, while other European states finance theirs at rates that are three points higher than inflation.