Italian Prime Minister Mario Monti joined the European Central Bank in a call to arms aimed at promoting growth in order to kick-start a revival movement in the Eurozone. EU leaders have woken up to the fact that budget savings alone are prolonging the agony as the devastating sovereign debt crisis rumbles on and on. They acknowledge that structural reforms and government spending cuts are integral to revival efforts, but now recognise that ‘new policy skills’ are also needed to reawaken European growth.
“If there is no demand, growth will not materialise. All the reforms we are putting in place now are deflationary,” said Mario Monti, speaking to business leaders in Brussels. Monti’s rallying call follows on from similarly growth-orientated speeches from ECB President Mario Draghi, and French Socialist Presidential candidate Francois Hollande. Draghi and Hollande have urged leaders to consider a ‘growth compact’ to accompany the existing ‘fiscal compact.’
The problem is that overspending and fiscal profligacy leading up to the crash in 2008 helped raise debt levels to unsustainable levels on a continental scale. To combat this wild spending and treacherous credit deals, a Germany-led austerity drive has been heralded as the key to a successful revival. But this ultra-harsh mentality of cutting costs, but not cutting corners, has left some of the weakest Eurozone economies on the brink of collapse. Bailout packages, political upheaval and riots have become widespread occurrences as civil unrest has proven the austerity-only option as a self-defeating philosophy.
Leaders are under no illusions: returning Europe into growth will be a convoluted and torturous task, but they have now accepted that stimulus for growth is needed. The German route is a mechanic path; the new course of reduction AND expansion caters far better to the needs of a living, breathing, and – hopefully – one day thriving population.