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Growth, need of the hour for eurozone

, June 1, 2012, 0 Comments

People in the eurozone have had enough of austerity. The new French president’s talk of growth is music to their ears. But the question is: How do you create growth without going into debt?

Since 2007, the Greek economy has shrunk by about a fifth. No wonder, then, that despite all its austerity measures, cuts and savings Greece’s national debt will rise again next year, to 160 percent of gross domestic product (GDP). Many people believe that the country that sparked off the debt crisis is the best example of the failure of German Chancellor Angela Merkel’s crisis management, which has primarily focused on budget consolidation.

The German Social Democrat politician Gernot Erler commented on German radio that the results of recent European elections illustrate that this opinion is widespread. “The policy of austerity has repeatedly been voted out, or else has failed, as for example in the Netherlands, Romania, Greece and France.”

Growth is the new buzzword

The presidential election in France has been particularly influential in altering the European discourse. “Austerity” is out – “growth” is in. This has not gone unnoticed in Berlin. The federal government recently even presented key points for a new growth package. These state that the key to growth is greater competitiveness, and that structural reforms are needed in order to achieve this. To put it more clearly: There will be no more money.

The opposition’s response is to yawn demonstratively and describe the government’s declaration as pure rhetoric, because greater competitiveness means more wage cuts. What’s more, structural reforms will ensure a more flexible job market which is generating even higher unemployment in the countries worst affected by the crisis. Yet the German government has also made some concrete suggestions: for example, claiming money from the European Investment Bank and from EU Structural Funds.

Excess money

The so-called Structural Funds and Cohesion Fund, which are intended to be used to balance out development disparities in the EU, now have a considerable sum at their disposal. “Many member states have applied for money in recent years, and their applications have been approved,” says Alexander Alvaro, Vice-President of the European Parliament. In the end, however, as Alvaro told DW, the monies were not claimed. “As a result,” he says, “there are currently 250 billion euros of accumulated claims.”

Source: Deutsche Welle |

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