Investors grow increasingly weary of waiting for resolute action to address this key issue. European leaders seem hopelessly unable to deliver growth. They engage in fruitless and ill-conceived discussions on budgetary rules while the house is on fire. The tug-of-war between hardliners and doves inevitably ends in a frustrating deadlock. France and Italy can boast of overcoming an excessive deficit ruling by offering token adjustments while Germany escapes unscathed from any criticism for refusing to invigorate its internal demand.
Meanwhile, Draghi is trapped in a corner. He cannot implement fully-fledged monetary easing as long as Germany maintains its stiff opposition to any move undermining fiscal neutrality. Meanwhile, his calls for urgent reform plans coupled with budgetary easing are contemptuously snubbed. The new Commission is pressing for a rather modest investment scheme, which has raised the irksome issue of who will foot the bill. As no candidates seem ready to loosen the purse strings, the initiative will soon fall into oblivion following the path of similarly ambitious enterprises in the past. A progress report on the bold €200 billion Barroso funding would prove how easily such fancy plans run aground as soon as they move into the shallow waters of Finance Ministries.
The hope of setting a credible growth strategy seems out of reach. Europe only bets on buying time in order for the economy to perform a comeback. While recovery is postponed once again, as sluggish results fail to match expectations, failure to act leads to the embracing of a wait and see stance. The continent is now counting on growth suddenly appearing around the corner, even if it peters out a few months later.
No one seems ready to admit domestic demand is being driven back by poor expectations and decreasing disposable income. Reform agendas add little added value when they mercilessly widen the gap between the haves and haves nots.