Commission: austerity to create "growth"

The European Commission issued recommendations, on June 7, to the 27 member states regarding their 2012 budget forecasts. Because it has never before made such recommendations, this is “something new in European economic governance, introduced to avoid a repetition of the ‘Greek tragedy’ of public finances and to stop [Member States from applying] policies that are too frivolous and costly to everyone,” economist Mario Deaglio explains in the Italian daily, La Stampa.

The recommendations are made within a particularly difficult economic framework, Deaglio notes. “If public debt is not reduced, there is no growth. Without growth, the reduction of public debt is enough to push the economy towards a new recession,” he explains. Yet Brussels has chosen to “come down hard on the brake of rigour,” he says. What the Commission is saying in substance, he added, is “we don’t want to impose austerity to the Europeans, but it is a fact that excessive public spending is limiting our growth potential”. The Commission deems that the government plans submitted “lack ambition” or are “too vague,” and it suggests a series of priorities: raise the retirement age; cut back on early retirements; link wages to productivity; cut red-tape for businesses and provide research and development aid. “It’s good in principle, especially for someone who isn’t accountable to the voters, but the application of these rather noble resolutions is very difficult for governments faced with rising unpopularity,” Deaglio says. He notes that the Commission is “particularly severe with Italy,” seen as “the key country for the strength of the euro”.

Another key country is Spain, where the Commission’s recommendations received a rather chilly reception. For Spanish daily La Razón, they “seem neither sound nor opportune,” because they would “unleash an inflationary process with lethal consequences for an economy in stagnation such as Spain’s”.

The Commission is harsh also with Belgium, which is asked to quickly reform nothing less than its economic structure, notes Brussels daily De Morgen. For the paper, the EU has squarely placed “another bomb under the formation of the government. Although, a year after the legislative elections the parties are still negotiating the formation of the executive, the Commission’s recommendations come and disrupt the talks. According to another daily, De Standaard, they have even “struck at the heart” of Elio Di Rupo, the Francophone Socialist charged with forming a new government. They also “widen the gap between the [Socialists] and the N-VA”, the main Flemish party, which shares Brussels’ approach. “There is no need for Di Rupo to come up with a programme, [EU Commission President José Manuel] Barroso has done it for him, De Morgen wryly notes.