Time to bury the austerity-only approach

RARELY has an election resonated so widely across the continent as the French presidential ballot.

Rarely has a leadership change in one EU member state created expectations of a real policy shift. Remarkably, a new European demos and public sphere are emerging from the crisis. Europeans are realising how interdependent they are.

François Hollande’s victory offers a fresh chance for the EU. The ending of the Merkozy directorate should bury the austerity-only approach that cripples economies and divides the EU. The new French president’s policy approach should not alarm anyone, including the markets.

Hollande’s plans for a growth initiative fall on fertile grounds, especially in the European Parliament which has repeatedly called for such measures. I am delighted that this message is increasingly echoed by the political mainstream, most recently by Mario Draghi, the ECB president, who called for growth to be put back at the centre of the agenda.

The European Commission is working on a “growth pact” to be discussed by EU leaders in June. Europe needs a master plan for growth to avoid the maelstrom of economic decline, growing unemployment, and weakening banking systems.

This growth pact can be properly financed, be it by new sources of revenue such as a financial transaction tax, joint project bonds for investment in infrastructure, or by curbing tax evasion and tax fraud, and eliminating tax havens, and by the more efficient and intelligent use of structural funds.

A new growth master plan would not be about printing money. Fiscal discipline remains essential, as are deep structural reforms. Stricter regulation must discourage collective greed and eliminate irresponsible financial products.

What is to be done? First, targeted investment should be given priority. The European Investment Bank could be a vehicle to boost spending on major infrastructure projects. In the longer-term, we should revisit the idea of joint eurobonds.

Second, young people are a priority. The eurozone’s unemployment rate of 10.9% is its highest level since the introduction of the euro. In Spain, youth unemployment is over 50%. We run the risk of creating a lost generation that could destroy Europe’s social fabric and stability. The young are not responsible for this crisis but they will bear the brunt. Investment to finance job training, improve education opportunities, and, crucially, offer employers incentives to hire young people is money well spent.

The ECB has offered loans to banks at a favourable rate. This money should be loaned out to the small businesses that are the lifeblood of Europe’s economy.

Third, member states should not cut the EU budget indiscriminately during negotiations on the Union’s long-term spending plan for 2014-2020 for ill-thought out, short-term, populist gains.

Europe can still emerge stronger from the economic woes. The egoism of some member states, the incompetence of some of the leaders, and a lack of empathy is turning the euro into a symbol for division, threatening the whole European project. We can not let this happen. We need solidarity, responsibility, vision, leadership, and unity.

Let us be optimistic, it is not too late. Europe at last is changing direction.