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Brussels’ knot

Published on July 5, 2012 by: in: Politics

The victory of Francois Hollande who has been sworn in as President of France on May 15 signalled the end of a continent-wide consensus around policies to confront the economic crisis. Mario Monti, Manuel Barroso, Mario Draghi, similarly to Socialist President Francois Hollande, start stressing the need to promote growth instead of German austerity measures. Herman Van Rompuy  announced a special summit (informal dinner) on May 23 for European leaders to discuss how to boost growth in the struggling with recession and rising unemployment countries of the eurozone.

During the campaign, Mr Hollande has declared the fiscal pact renegotiation which most likely means adding a few new sections to the pact but it still requires further negotiations, 75% tax on top earners which would probably affect about 3000 households and lowering the retirement age for those who started work at the age of 18. It does not come as a surprise then that Hollande’s election set financial markets rallying and Angela Markel openly supported Sarkozy re-election.

World financial markets drop was sparked by Mr Alexis Tsipras’s speech, the leader of the Radical Left (Syriza) coalition, which unexpectedly won the second highest share of the vote in Greek election. The Sariza rejects the terms of Greece’s aid deal to purchase Greek debentures and claims that they lead to its lock-up, inevitable insolvency and as a result to Greece leaving the eurozone. Greece is trying to regain control of its own economy as today it is the German Chancellor not the Greek Prime Minster who is deciding in practice on its economic policy.

The remaining question is if Greeks know the consequences of this step?  The answer to this question may be provided by the new Greek elections that in the country’s unresolved situation seem to be inevitable. Not only in Greece but throughout Europe politicians find themselves under growing pressure to represent contradictory interests of their electorates.

While Germany demands austerity measures and no more financial aid to indebted eurozone partners, France wants less drastic revolution, including more government spending. The Lisbon Treaty, fiscal pact and, above all, political practice have decided that measures to fight the European crisis have being taken on international instead of national level.

In fact, Germany and France decide on fiscal policy of the EU member states which is a clear violation of democratic national interests. In this case, social tensions are inevitable and they  could be only solved by more federalism and democratic control over the decisions taken at a European level. Unfortunately, it seems that European leaders are not eager to sacrifice their powers in order to strengthen Europe.

Other problem is that even if they all talk about  the economic growth, they have different ideas how to achieve it. According to Draghi or Merkel, growth might be achieved through structural reform e.g. working time flexibility. However, from Hollande’s point of view the growth alone will let avoid reforms and there is no need for another austerity budget. In France, globalisation and capitalism (which both brings in a lot of extra income for France) are still its whipping boys.

picture: aeneastudio

On one hand Mr Hollande tends to deny any need of reforms (though, he has promised to reduce the government’s budget deficit to reach 3%, otherwise sanctions against France will be imposed), on the other hand, lately he has shown an understanding that what Europe needs is a greater mutual European cooperation between its members, not only to tackle the crisis. Therefore, he might be more flexible in conversations with other European leaders, particularly with concentrated on austerity and sanctions Germany. If not and he fails, it may lead to dissolution of consensus around measures how to fight the economic crisis which would be a catastrophy, firstly, for countries which have less credibility in financial markets and then for all of those which are more credible.

It is highly probably that Mr Hollande will become a leader of Mediterranean countries which are campaigning for more focus on the growth. The newest puzzle for European politicians to rack their brains on is: how to fight the debt and reduce deficit without risking monetary inflation by printing more money? And is there anyone who will be able to solve it?

Translation: Katarzyna Toruńska

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About Leszek Jażdżewski

Politologist, publicist, regular political commentator in Polish media. Editor in chief of “Liberté!”, Polish liberal socio-political journal. Studied international relations in University of Lodz, Institute of Political Studies on Polish Academy of Sciences, Glamorgan University in UK and Tbilisi University in Georgia. Vice-president of Liberal Forum, member of the council of Projekt: Polska Foundation, secretary of the board of Transport Integration Society, vice-president of Industrial Foundation. Coauthor of books: “Liberal reflections on life chances and social mobility in Europe” and “Democracy in Europe. Of the People, by the People, for the People?”

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