European Union leaders want to fight more effectively for economic growth; new job creation and the budget savings are supposed to be more 'growth-friendly'. The question: is it not too late for this pro-growth offensive?
While EU leaders were gathering for the summit in Brussels yesterday, thousands of people in Belgium's capital came out in protest against budget savings and the transferring of costs of the crisis onto the citizens. People in all of Europe are fed up because the Euro zone economy is in recession and companies continue mass layoffs. In January, there were 26.2 million unemployed in the whole EU. The unemployment rate in Spain or Greece went past the inconceivable 26% mark.
Yesterday the EU leaders, and later on Euro zone representatives at a separate meeting discussed, among others, how to stimulate the growth of European economy so as to not take a step backward in reducing budget deficits and lowering debt. Politicians had much fuel for thought after the recent elections in Italy when parties against drastic reforms and savings received significant support.
'We cannot turn a blind eye to civil unrest in certain countries,' said Herman Van Rompuy, President of the European Council.
It is no wonder, then, that EU leaders are trying to dedicate more attention towards GDP growth. In the draft version of the post-summit communiqué we read that the 'stagnation of economic activity forecast for 2013 and the unacceptably high levels of unemployment emphasize how crucial it is to accelerate efforts to support growth'. Although the tools intended to stimulate growth are still the same, including increased borrowing from the European Central Bank, more money towards fighting unemployment amongst young people, removal administrative barriers or continued development of a common market.
But at the same time 'the European Council stresses the necessity of differentiated growth-friendly fiscal consolidation'. What does that mean? State representatives may understand this differently. Germany, considered to be the paragon of fiscal responsibility, encourages further savings, though appropriate to a given county's situation. The French, Italians, and Spaniards would rather see more consent towards belt loosening in order not to stifle economic growth.
Germany has had a rather easy time going through economic turbulence. It is true that our western neighbor's economy did slow down to 0.4% in the 4th quarter of 2012 (annualized). However, unemployment in Germany is among the lowest in Europe and the government in Berlin is doing quite a good job at balancing public finances. On Wednesday the Bundestag passed the budget that assumes that in 2015 Germany will not have to take on new loans to finance its current activity. They will take out loans only to pay back old debts. According to the German Federal Minister of Finance Wolfgang Schäuble, it is proof that 'savings and growth are not mutually exclusive'.
The French are opposed to Germany's savings rigor. On Tuesday President Francois Hollande admitted that France might not be able to lower the deficit of the public finance sector to the promised 3% GDP. The deficit will amount to 3.7% GDP. The French president stated that moves should not be made 'that could weaken growth'. The next issue on the Euro zone leaders' agenda is financial aid for Cyprus.
Natural growth - real economic activity is created with the appearance of new investment tasks that activate private capital. It is about breaking the 'vicious circle': about supplying the market with billions saved up on private accounts, not with government borrowing or subsidies that only increase deficit and debt and as a result - unemployment.
It is known that contemporarily great modernizing civilizational investments have stimulated long periods of economic activity - periods of 'economic miracle'. However, they were only pocket surges of investment activity - periods of 'economic miracle'. However, they were only pocket surges of investment activity.
Technical and technological progress has reached such a high systemic level that further civilization growth forces simultaneous development of modern systems at a global scale! It is enough to have a look around the world: there is so much to be done post-haste! And for that there are vast amounts of money saved up…
Author: Stefan Papp / PR-Controlled ©