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No longer predictable

May 11, 2012

REMEMBER when Europe was a quiet and predictable place, with leaders who seemed to know what they were doing, kept our anxieties in check, allowing us to sleep more or less soundly every night?

Well, those days are gone. Europe’s economic landscape is changing fast. For years the talk was of tightening belts, cutting budgets and shedding jobs. Now — finally — it is about growth and development. In fact, it’s all change, change and more change across the continent as embattled European leaders stumble and fall over the euro crisis, taking fragile governments down with them.

Only weeks after the Dutch government handed in its resignation after the far-right objected to plans to cut the country’s public deficit, France’s Nicolas Sarkozy has been voted out, replaced by François Hollande. Down south, meanwhile, Greece faces serious political and financial turmoil and the governments in Spain and Portugal are equally rattled.

Sarkozy is in good company. Seven European prime ministers have been swept out of office since January 2011, including Ireland’s Brian Cowen, Italy’s Silvio Berlusconi, George Papandreou of Greece, Spain’s José Luis Zapatero and Dutch premier Mark Rutte. The departure of these and others in recent years is a good demonstration of European people’s power. As unemployment rises in Europe — especially among young people — citizens across the continent are showing their unhappiness with current government policies.

Many are particularly frustrated and angry at leaders’ failure to take the lives of ordinary people into account as they try and meet tough austerity targets. Reports point to a surge in Europeans — especially young professionals — leaving their countries in search of better jobs in emerging nations in Asia, Africa and Latin America.

Mr Hollande’s election is good news for Europeans desperate to see some light at the end of the bleak tunnel of austerity and fiscal rectitude. Of course Europe needs to put its financial house in order, balance budgets and do things the German way.

But ordinary folks also need to be given some hope for a better future. There are no easy answers — and as Mr Hollande will certainly find out very quickly, there is no simple recipe for ensuring growth across Europe. The new French leader is right, however, that EU discourse and policies have to shift from austerity to job-generating growth.

The switch in focus is also important to curb the rising popularity of Europe’s far-right parties whose unpleasant anti-foreigner rants often mask an equally toxic view of Europe. Extremist parties in many EU countries are using public anger at austerity to hammer home their message against immigrants but also at EU leaders’ disconnect from ordinary people.

Geert Wilders, the far-right Dutch politician last month withdrew his support for the ruling coalition, prompting the prime minister, Mark Rutte to hand in his resignation. In France, Marine Le Pen’s Front National has made extraordinary gains among a disenchanted electorate.

Slowly but surely, others are joining the growth bandwagon. José Manuel Barroso, the European Commission president, has switched the emphasis from austerity to growth although he has insisted that debt-laden governments would have to continue to tighten their belts. Mr Barroso has asked EU leaders to approve a 10bn-euro increase in lending capacity for the European Investment Bank to allow increased lending to cash-starved small and medium businesses.

The commission also wants agreements on euro bonds to fund EU infrastructure projects, such as roads and pipelines.

Hollande has said he would renegotiate the fiscal compact that most EU leaders signed late last year to incorporate a ‘growth dimension’. The pact is designed to increase fiscal discipline and prevent a future crisis by ensuring that governments respect deficit rules and do not overspend.

Details of such a future deal will be discussed at a summit of EU leaders in Brussels on May 23. The meeting will see French Socialist president-elect François Hollande take his seat among fellow EU leaders for the first time.

EU officials insist that there is no choice between austerity and growth, because both are necessary. “The debate of consolidation versus growth is a false debate,” EU Economic and Monetary Affairs Commissioner Olli Rehn said recently.

“In the current economic situation of low growth and high debt there is no choice — we need to pursue both simultaneously,” he said adding: “Fiscal consolidation must be pursued in a growth-friendly and differentiated manner.”

However, much will depend on Germany’s attitude. So far Chancellor Angela Merkel has been insisting that austerity must remain the name of the game. Although Britain is outside the eurozone, Prime Minister David Cameron remains fiercely opposed to any increase in EU spending.

But Mr Hollande has the support of European Central Bank president Mario Draghi who has also come out in favour of measures to promote growth. Mr Draghi has said Europe’s leaders should prepare a 10-year vision for the euro. Urging a revival of efforts in the 1990s, when he was head of the Italian treasury and the foundations were laid for the launch of Europe’s monetary union in 1999, Mr Draghi’s call hinted at ECB frustration over the loss of political momentum behind Europe’s economic integration.

While the increasing emphasis on economic growth is a positive development, it remains to be seen how financially challenged European governments will fund their stimulus programmes. For the moment, however, Mr Hollande’s election victory has brought a glimmer of hope into Europe’s so far bleak economic landscape. It is unlikely that even the stubborn Mrs Merkel will be able to stand alone against the wave of public demands for more humane European economic policies.

The writer is Dawn’s correspondent in Brussels.