But conservatives, with German Chancellor Angela Merkel in the lead, have objected that abandoning the efforts to pare back deficits could lead to renewed pressure on the euro, the European Union’s common currency, and revive the sense of impending disaster that gripped the continent two years ago. Interest rates have stayed low for the past six months, they warn, but that could change quickly, with uncontrollable consequences for heavily indebted governments.
The budget strictures have contributed to stagnation or even a decline in growth in most of Europe’s major economies, hitting politicians hard when they return home to face their constituents and reinforcing their doubts. France will finish this year with 0.1 percent growth, E.U. economists have forecast, and Italy with minus 1 percent. Germany, they said, will be the exception, with 0.5 percent growth.
As a result, unemployment has soared in key economies, and according to E.U. economists, there is little hope for a significant recovery before 2015. France’s unemployment rate has hit nearly 11 percent — which was already the rate in Italy — while Spain’s recently rose above 27 percent. Again, Germany is the exception, with an unemployment rate a little over 5 percent, giving Merkel a sound platform for her preaching on budget restraint.
“Italy is dying because of austerity alone,” that country’s new prime minister, Enrico Letta, complained in his first address to Parliament on Monday. “Stimulus policies can no longer wait.”
The critics get personal
France’s austerity critics have made the doubts personal, blaming the conservative Merkel and challenging Hollande to defy what a leaked Socialist Party report called her “egotistical intransigence.” The influential German leader, the report’s drafters charged, “thinks about nothing except the savings of account holders on the other side of the Rhine, the trade balance racked up by Berlin and her electoral future.”
The flare-up, in addition to its effect on relations with Merkel, added to a growing impression of disarray and lack of direction within France’s Socialist government one year after Hollande defeated the conservative president Nicolas Sarkozy.
At the urging of French Prime Minister Jean-Marc Ayrault, a former German teacher, the Socialist document was watered down to pin the blame on “the German right wing’s market-oriented policies” rather than Merkel personally.
But the anti-German theme was reinforced at the same time by Claude Bartolone, president of the National Assembly, who called on Hollande to mount a “confrontation” with Merkel on the question of budget balancing.