It’s time to stop digging

If Europe wants to get out of its current hole, it must first stop digging.

Over the past four years, economic crisis management in Europe has been dominated by a narrow obsession with fiscal discipline. The narrowness of this approach reflects in large part the German political elite’s misinterpretation of Europe’s current crisis as a Greek crisis writ large, and a wider failure to understand that growth cannot resume if governments all cut spending in the aftermath of a major financial shock that has left banks more inclined to restore their balance sheets than to make entrepreneurial loans.

The inappropriateness of this interpretation, and thus of the policy measures derived from it, are now clear for all to see. Growth has stalled or gone negative across most of Europe, while unemployment of young people (18-25 years)  is now at 58% (!) in Greece and not far below that in several other member states. In these circumstances, it’s just a matter of time before political extremism becomes mainstream. In short, it’s time to stop digging.

Of late, some of the best analyses of this situation and most realistic and far-sighted proposals for how to correct it have been coming from the Policy Network, an international centre-left think-tank and network based in London. Have a look at its publications here.

The problem is that even the best ideas do not themselves yield good policy. For that, Europe needs political actors willing and able to lead the Union and its member states in a new direction.

With Germany drunk on its own kool-aid and increasingly focused on the 2013 elections, Italy likely to return soon to its normal brand of dysfunctional politics, the Spanish government rivaling Hamlet in indecisiveness, the UK increasingly distracted by nativist Europhobia, a European Council president who’s more secretary than general, and a European Commission president perpetually lacking in vision and political skill, it’s not clear who will take the lead nor who will follow. Bon courage Monsieur Hollande!