By David Henry
Austerity is no longer Europe's only child. The fiscal compact enshrining budgetary restraint is soon likely to be joined by the growth compact, a sister program that is supposed to round off the European response to the sovereign-debt crisis. Not a bad idea, but it sounds a lot like a recycled version of the Stability and Growth Pact, which was routinely violated because there was no enforcement of the rules adopted in 1997.
Political mutinies are taking place across the continent as voters reject the German-sponsored medicine forced on the European Union's member states. The new two-pronged strategy can barely disguise the weariness of electorates as they weigh the consequences of reduced entitlement spending and public investment. ``That this debate is even taking place is a sign of reform and austerity fatigue in Europe,'' Commerzbank AG Chief Economist Joerg Kraemer told Die Welt newspaper today.
But the debate about the importance of promoting economic growth as a second pillar does provide an opportunity to reset the balance of power in the EU and to temper Germany's ability to set the agenda. As voters go to the polls this weekend in the state of Schleswig-Holstein and in Greece, most attention will be on the election taking place in France. If Francois Hollande wins on May 6 against Nicolas Sarkozy, Germany will be forced to rethink its entire approach to the euro crisis to maintain relations with its main EU partner. This may well result in an increased German willingness to surrender fiscal powers to EU authorities in Brussels so that Germany doesn't find itself politically outnumbered by a group of countries hostile to austerity.
``Germany, which owes its economic power also to the weaknesses of its European neighbors, has for far too long been without a real political competitor in the European Union,'' Stefan Kornelius, a columnist for the Sueddeutsche Zeitung, wrote today. ``This dominance, although not strived for, is unhealthy and promotes resistance.''
If more integration and a bigger say for smaller EU countries is the result of the reshaping of Europe's political landscape, the squabbling over growth and austerity will have been worth it.
(David Henry is an editor for Bloomberg View.)
For more quick commentary from Bloomberg View, go to The Ticker.-0- Apr/30/2012 17:48 GMT