Growth Policies in Europe

Abstract

While the European summit at Lisbon in the spring of 2000, in the euphoria of a relatively sustained period of growth, proclaimed ambitious objectives for employment rates and promised to make the EU ‘the most competitive knowledge-based economy …’, the five years that followed unfortunately recorded economic performance well below these ambitions. Harsh diagnoses on the state of the European economy and its chief members have multiplied in recent years (Camdessus et al., 2004; Kok ét al., 2004; Sapir et al., 2004; Blanchard et al., 2005). They concur in identifying some serious slack in the European economy in comparison with the United States and in the emphasis placed on the dangers that the prospects of lasting weak growth would pose for the financing of European systems of social protection in particular, which would not be supported by demographic change (because of the rapid ageing of European populations) or by technical progress since efforts in research and development in Europe are inadequate. All blame the ‘rigidities’ that are characteristic of European economies, especially in the labour markets, the inertia of public sectors and the too heavy tax burden on the net return from the efforts and savings for financing them and social protection. All seem to agree on the idea that the macroeconomic policies are globally good, or at any rate that the ‘stability culture’ shared by the chief leaders at the heart of the European economic and monetary union — the famous ‘Brussels-Frankfurt consensus’ (Sapir et al., 2004) — and the institutions that are inspired by and support it (the independent central bank, pursuing a primary objective of price stability, and the SGP framing the national budgetary policies) are all in no way responsible for the poor economic performance of the eurozone, and that only ‘structural reforms’ radically transforming the European welfare states and drastically lightening their financial burden are likely to encourage a salutary ‘rebound’ (Camdessus et al., 2004).