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Europe has to pull together
Publication Date : 09-05-2012
Before French voters elected a tax-and-spend socialist for president, Europe faced merely a lifestyle adjustment of living frugally, after the 2009 banking collapse exposed the continent's wanton ways. The ouster during this troubled period of 10 European leaders who had observed budget stringency to the letter was evidence that the deflationary prescription was not getting support. Joblessness worsened across Europe and more economies fell into recession, Britain being the latest one.
This did not necessarily prove that austerity was the wrong medicine. But after the French election brought in a maverick who seems to be saying he can spend his way out of trouble, Europe faces potentially something worse. If political discord between France and austerity-focused Germany is of such a fundamental and divisive nature, the future of European federalism and the single currency could be at risk. The continent would either stumble along, still proud but greatly weakened, or a unity experiment to erase a legacy of conflict may have to be abandoned.
Which is worse is hard to fathom. Prolonged economic malaise is un-European and could encourage ideological extremism. But a Europe returned to its pastiche of smallish nation-states working at cross purposes will exhaust the continent's collective strengths. Asian countries which export to Europe and buy European technology would much prefer dealing with a de facto unitary state which the European Union is in many ways, even with half of its members outside the euro zone. The United States too desires European unity, mostly for security reasons.
It is within the powers of German Chancellor Angela Merkel and French President-elect Francois Hollande to prevent straining a relationship which has held Europe together. Dr Merkel's adherence to restraint, which brings no job growth but stabilises public finances, is only as relevant as the political support it gets. This has been waning. Mr Hollande's push for a spending stimulus to create jobs then has a fresh appeal. But it has to be modified to be acceptable. Europe's austerity is driven by spending cuts rather than tax hikes. The middle and working classes have been bearing the burden. The misery has to be distributed more evenly. Germany may eventually relent by permitting a growth-stimulus supplement in the euro zone's austerity document. No one can possibly argue against growth. But how to achieve austerity and growth at the same time is not the only knot that has to be unwound. Another is how to rally voters behind a workable plan.