Last week a number of European public figures joined the ranks of those calling for renewed emphasis on growth. The most remarked was Mario Draghi during his audition before the European Parliament; but equally important was the joint statement of Mario Monti and Manuel Barroso. “Growth” seems to be the word of the month, a must in any European leader’s speech.
I will certainly not complain, about this, because both the reduction of unemployment and the sustainability of public finances in the eurozone simply cannot happen in stagnant economies. Nevertheless, once more, there are some reasons for being worried. At a close look, it seems as if the word were an empty box, simple lip service paid to public opinion in order to keep doing business as usual.
The European Council meeting, next Monday, should finally lift the veil of mystery that has surrounded the new “fiscal compact”, the set of rules supposed to govern fiscal policy in EU member countries. As of now, the only official document in our hands is the Statement approved by the Heads of State and Government at the December 9 meeting.
I have argued at length that I am not in the camp of those who believe fiscal profligacy is the source of EMU problems (recently, here and here). Rather the contrary, I always thought (see for example here and here) that even the current rules de facto prevented EMU countries from effectively using the standard tools of macroeconomic policy.