Please, please stop calling it a “Grexit“. The word (a portmanteau of “Greek” and “exit”) has been doing the rounds recently, as the possibility of Greece rejecting the conditions of its EU/IMF emergency loans, defaulting on its debts and leaving the Single Currency altogether start to grow worryingly real. Still, none of that is an excuse for the word “Grexit”.
Last week, Debating Europe attended a European Movement International briefing in Brussels with László Andor, European Commissioner for Employment, Social Affairs and Inclusion. We took the opportunity to put one of your comments to Commisioner Andor for him to react. Joe had sent in the following, putting things quite starkly: “[Greece, France and other countries may] not agree with austerity, but if they have no money, they can’t spend it.“
Commissioner Andor, however, disagreed. He argued that the recent elections offered a chance for “fresh political debate” and that it was time for a change of direction:
Well, I think this is exactly the time to reconsider the fiscal consolidation policies as they have been implemented in the last two or three years… I believe if there is a new, fresh political debate about this, this will take into account the objectives of employment and social cohesion stronger than in the past period.
Elsewhere on the Commission, there also seems to be growing support for a shift in policy. We recently spoke to Commissioner Joaquín Almunia, European Commissioner for Competition and a Vice President of the Commission, to ask his opinion on the “growth versus austerity” debate. As Oliver put it, “Some political movements preferred pure austerity, others saw that reforms were necessary, but wanted to flank them with growth initiatives.” Which camp would Almunia fall into? He responded:
Growth should be produced through different engines. On the one hand, repairing the damages caused in the financial system by the crisis… on the other hand, through structural reforms that will be growth friendly… and, third, through some policy initiatives that will compensate the aggregate demand that is being lost because of the adjustments that are needed.
The promise of “policy initiatives” to compensate for the loss of aggregate demand will be particularly intriguing for those who argue that a focus purely on austerity has hit a brick wall. We asked Commissioner Almunia if he supported ECB President Mario Draghi’s call for a “growth compact” to complement the “fiscal compact” setting limits on national budgets:
We need now at the present moment, when some of our economies are suffering a recession, we need to coordinate actions conducive to growth. If you can call this a ‘growth compact’ to complement the fiscal compact, I agree with this.
What do YOU think? Are you optimistic about the idea of a “growth compact” to complement the “fiscal compact”? Or, with Greece risking default and an exit from the eurozone, do you think it’s a case of “too little, too late”? And what should these growth-oriented “policy initiatives” actually look like? Let us know your thoughts in the form below, and we’ll take them to policy-makers and experts for their reactions.