MADRID | No one expected the Rome gathering to produce a comprehensive answer to the euro’s acute problems. Divergences still run high between Germany and France on the right approach to take. Avoiding the impression other partners might be faced with a ready cooked solution in the forthcoming Summit, also invited to adopt a self-restrained attitude.
So leaders from the four leading economies in the euro area choose to come together on an uncompromising drive for growth. Earmarked money intended to support that aim would amount to 1% GDP. A small scale push that is likely to induce limited effects on production and jobs creation, as a large chunk of funds will come from already available idle EU budgetary items. Even so, emphasising the need to underpin fiscal stability with a growth-oriented strategy represents a landmark in euro governance. For the first time, Germany has openly recognized that austerity without growth only leads to worsen matters.
This outcome overshadows the worrying fact that little progress has been achieved in other key areas. True enough, financial transactions levy certainly received full backing. But this measure largely amounts to mere wind
ow-dressing even assuming it might gather an unlikely Europe-wide support.
On substance, Ms Merkel flatly refuses any overture on anything that might jeopardise German guiding principle to avoid mutualising risk. No Eurobonds before putting in place a solid fiscal compact and enhanced political union. No ECB disguised monetising of public deficits by triggering massive interventions to support sovereigns. No direct bail out for ailing banks out of rescue funds. Ms Nein made it clear that any attempt to circumvent such discipline would be fiercely opposed.
The much heralded need to break the link currently tying financial and sovereign risk will amount to a merely rhetoric statement. To be sure, broad agreement on an enhanced banking union will gradually build into a common framework for supervision and self-financed rescue resources. But on the short term each country will have to redress on its own any banking failure. Germany bets that buying time on this thorny issue will dispel the prospect of having to foot the bill, firmly believing the current crisis will be overcome once the fiscal disarray is cleaned up.
She might be right. But the price to pay for such a wait-and-see strategy is extensive damage on European economies. The euro might survive but it will no longer be associated with the potential to deliver prosperity. Failure to encompass stability with growth inevitably turns monetary union into a lame duck.