Politics Life at 28

European Council: Anti-austerity front grows in Europe

1 March 2012
Le Monde Paris

The European Union Council, which begins on Thursday, is scheduled to sign the new fiscal compact. But at the same time, a dozen countries, led by Italy, are contesting the austerity policies imposed by "Merkozy" and calling for an economic stimulus package.

French President Nicolas Sarkozy has given the pact minimal support, out of consideration for German Chancellor Angela Merkel. His Socialist opponent (in the up-coming presidential election) François Hollande has promised to renegotiate the accord if he wins the ballot. The Budget Pact is scheduled to be signed by 25 European heads of government on Friday, March 2, in Brussels. Only the United Kingdom and the Czech Republic are expected to abstain, but the issue is not yet closed.

Signing the pact opens the way for the ratification procedure, but this could be tricky at a time when there is a relative reprieve of the sovereign debt crisis due to the Greek bailout. This Tuesday Irish Taoiseach (Prime Minister) Enda Kenny, unexpectedly announced his intention to organise a ratification referendum.

In France, Mr Sarkozy has decided not to rush the ratification of the pact by parliament, preferring to wait until after the presidential election (April 22 & May 6) and the legislative elections (June 10 & 17). But he intends to schedule the ratification vote quickly if he is re-elected. On the other hand, if Mr Hollande is elected, many leftist leaders do not want to ratify the pact as it exists. They hope to strengthen, as of the June EU summit, the growth and economic governance chapters of the pact, which they see as, first and foremost, a way to etch in stone the notion of budgetary discipline so close to Ms Merkel's heart.

Herman Van Rompuy, President of the European Council, whom the heads of government should confirm for another two and a half years in his post, hopes to avoid a challenge to the European Stability Mechanism, which is currently on course for ratification. Under pressure to strengthen this permanent bailout fund, Germany insisted on linking the two agreements politically.

In substance, the difference of opinion on the new treaty between Mr Sarkozy and Mr Hollande reflects the current state of discussions within the 27 EU members. Having, under market pressure, favoured austerity they must now discuss the best way to support their economies without increasing deficits. The austerity plans currently implemented just about everywhere on the continent are being more and more contested by trade unions and by public opinion as unemployment rises in the most precarious countries.

“The crisis we are facing is also a growth crisis”

In addition, they risk, according to many leaders, aggravating the looming recession. "Right now we are focusing too much on the financial penalties and the austerity plans," said Socialist Martin Schultz, President of the European Parliament during a visit to Athens on Tuesday.

Warnings of this sort are more and more frequent. Twelve countries, including Italy, Spain, the Netherlands, the United Kingdom and Poland, are asking for a reorientation of the economic policies defended by the Merkel/Sarkozy duo. "The crisis we are facing is also a growth crisis," they said in a letter initiated by Mario Monti, the caretaker Italian Prime Minister.

But, in the minds of the twelve signatories to this letter, the solution is to be found in greater deregulation, through labour market reform in each of the States and by increased commercial opportunities on the continent. These are not the types of solutions touted by the French left. The recession that threatens the 27 Member States is of special concern to their international partners. In the short-term, the stakes are also – and perhaps even especially – to define the terms of application of the stability and growth pact, as reinforced last autumn. Spain is also asking for its obligations to be reduced, a request batted aside by the EU Commission as well as the European Central Bank.

Upon taking office, the newly-elected French President will be faced with a dilemma: protecting the credibility of the collective monitoring apparatus slowly emerging from the Eurozone crisis.

Translated from the French by Pat Brett