At the 17th summit by European Union leaders since the eurozone crisis began, the rallying cry and hope for the meeting boiled down to a single word: growth.
For two years, EU leaders have agreed to and acted on austerity measures, slashing spending even as four governments fell, unemployment rates rose, and the EU distributed bailout funds.
But despite the urging of EU policies by business and world leaders at the annual Davos economic summit last week, the 27 EU leaders agreed to few potent stimulus actions yesterday. They approved a “fiscal unity” pact that will open the door to sanctions for EU states that take on too much debt, but it was difficult to find significant policies that satisfied the call for growth, experts say.
Still, that growth talk has joined austerity as part of the discourse of the eurozone crisis, and is seen as one remedy for it, may be a short-term consolation for stimulus advocates.
As EU leaders left the Brussels summit, they certainly talked the talk of growth, but analysts worry that under the German-driven set of solutions, there has been little actual movement towards it.
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Danish Prime Minister Helle Thorning-Schmidt said afterwards, "It's very important that we don't forget the growth and the jobs. Everything starts and ends with growth and jobs.” Luxembourg’s President Jean-Claude Juncker offered that, "It is about employment. We have to learn to explain that it's not just about the consolidation of our finances, but we also need the prospect of growth." Austria's Chancellor Werner Faymann opined that “We now also have to talk about growth. We have to make savings, everybody knows this…. But the big is question is how to tackle employment. If we don't massively campaign for sustainable growth then we are missing a pillar.”
Even Britain’s David Cameron showed up with a growth package proposal.
The most substantial growth idea that emerged yesterday is a proposal by Jose Manuel Barroso, president of the European Commission, to dedicate up to 82 billion euros ($107 billion) to stimulate employment and small businesses with money leftover from EU discretionary budgets dating to 2007. But few specifics were given after the summit broke up late last night, and the policy community and financial sector downplayed Mr. Barroso's idea.
“What [EU leaders] are trying to do about youth unemployment is useful if done well … facilitating the young into the labor market is a good thing,” says Thomas Klau of the Paris office of European Council of Foreign Relations. “But if you look at the urgency of the growth problem in Europe, the measures that have been decided are almost certainly not enough.”
Citibank officials derisively described the outcome of the meeting as a “compact for low growth,” Reuters reports.
Yesterday's meeting had “no positive surprises, no negative surprises,” argues Sony Kapoor of the Brussels think tank Re-Define, which yesterday put out a comprehensive plan for EU growth. “But the growth aspect [of yesterday's meeting] is still rhetorical and largely irrelevant to the current needs of the crisis, and seems something of a political ruse," he said.
Mr. Kapoor added, "The sum total of the proposals are small and unambitious in scale and scope…to counter what we face…we need more ambitious and pan-European proposals…the No. 1 need is infrastructure."
The urgency and divisiveness evident in the last EU meeting in early December was more muted yesterday – partially because of actions taken by the European Central Bank, which broke with its traditions last month to lend some 500 billion euros ($654 billion) to European banks.
The lending, comparable to the US Federal Reserve's “quantitative easing,” has bought the EU some “breathing space,” says Jacob Kirkegaaed, a fellow at the Peterson Institute for International Economics.
Some analysts, like Philip Whyte of the Center for European Reform in London, say the problem is a “lack of demand” for goods and services that can be solved primarily by growth policies. “Slashing spending as economies contract is not the complete answer,” he says. “Yet this is what we are hearing.”
For two years, EU leaders have agreed and acted on belt-tightening measures, slashing spending in Greece, Spain, Italy, and France as four governments fell, bailout funds were disbursed, and unemployment figures rose, reaching a 10.4 percent average across the eurozone by the end of 2011.
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