As Europe slides deeper into recession, politicians are getting ready to ditch painful austerity measures in favour of new initiatives aimed at boosting economic activity.
At a press conference in Paris, the French Socialist candidate Franois Hollande – who is the frontrunner to win the presidential election in May – repeated his pledge to renegotiate the European fiscal debt pact to ensure a greater emphasis on growth, and stepped up the pressure on Berlin to accept that fresh growth initiatives were the only way to solve the region’s crippling debt crisis.
Hollande warned of growing split in the eurozone between the northern countries and the debt-laden southern countries. "If we say Germany will pay to cover the debts and deficits, I understand their reticence. Everybody must make their efforts [on public finances],” he said. "But Germany must realise that it is growth that will allow us to solve a big part of our problems.”
Much to Hollande’s delight, his approach appeared to enjoy the backing of Mario Draghi, the boss of the European Central Bank. Overnight, Draghi told European parliamentarians that a "growth pact” was necessary, although he also emphasised that eurozone governments should keep tight controls on their spending, and that growth plans should focus on structural reforms that would boost competitiveness.
Hollande has been quick to highlight growing support for his idea within the eurozone. According to the French newspaper Le Monde, Hollande overnight noted that European leaders had changed their attitudes after his victory in the first round of the presidential elections on the weekend. The result, he said, had "freed up the speech” of European leaders, "not all of whom are from the left”. The outcome of the French election, he noted, "undoubtedly counts a great deal.”
If Hollande wins the final round of the French presidential election on May 6, he will immediately send other European leaders a "memorandum” proposing changes to the European fiscal pact in order to put greater emphasis on growth. Hollande’s new growth plan includes the creation of eurobonds – which would be jointly backed by all eurozone governments – to finance future industrial and infrastructure projects.
The memorandum will also propose an expansion in the European Investment Bank’s funding role, the introduction of a tax on financial transactions, and the more efficient use of structural development funds.
Hollande’s emphasis on growth has seen him winning growing support within Europe, even from conservative politicians. Former Italian leader Silvio Berlusconi said that while he wasn’t hoping that Franois Hollande would win, "he might bring a new wind into Europe, for instance by refusing the fiscal pact.”
Meanwhile, his former finance minister, Giulio Tremonti, said on Italian television that although he was a personal friend of current French president Nicolas Sarkozy, "if I were French, I would vote for Hollande, he shares many of my ideas.” He added that this included "the reform the international financial system.”
Even German Chancellor Angela Merkel, who is supporting Nicolas Sarkozy in the May presidential elections, has felt the need to pay lip-service to the need for greater economic growth.
However, she was quick to rule out the possibility that Europe could boost its economic growth by increasing government spending. "We need growth in the form of sustainable initiatives, not simply economic stimulus programs that just increase government debt, but growth – as Mario Draghi said today, in the form of structural reforms," she told a meeting of her Christian Democrat party in Berlin.
Is Hollande Europe's new Mr Right?
French presidential frontrunner Francois Hollande's plan to rejig Europe's debt pact is garnering growing support – from ECB boss Mario Draghi and conservative national leaders.
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