“The European Union is taking all necessary measures to put Europe back on the path to growth and jobs,” said a communique after the two-day gathering in Brussels. “This requires a two-pronged approach, covering both measures to ensure financial stability and fiscal consolidation and action to foster growth, competitiveness and employment.”
In that spirit, 25 of the 27 E.U. leaders also signed what was called the Treaty on Stability, Coordination and Governance. The pact, agreed Jan. 30, contained a pledge to enact national legislation limiting government deficits to less than 0.5 percent of the national economy, or gross domestic product, and to accept a fine imposed by E.U. bureaucrats if that level is exceeded.
The treaty marked an unprecedented relinquishment of national sovereignty to E.U. institutions in Brussels, making it a milestone on the march toward European unity and economic integration. But it contains several loopholes, economists pointed out, that countries might be able to use to squirm out from under its budgetary discipline.
In any case, the treaty enters into force almost a year from now, on Jan. 1, 2013, provided 12 of its 25 signatories have ratified it. That means its rules are likely to have little except psychological bearing on the current crisis.
In addition, Britain and the Czech Republic refused to sign on from the beginning, citing sovereignty concerns. Ireland has scheduled a referendum next summer to see whether it should continue to take part. Even France, which along with Germany pushed for negotiating the treaty, was unsure whether it could remain as a signatory.
Francois Hollande of the Socialist Party, the front-running candidate in France’s two-round presidential election April 27 and May 6, has said he would demand a renegotiation if elected, to focus on economic growth alongside budget-cutting. Moreover, the Senate would have to approve the ratification and it is currently controlled by Hollande’s Socialist Party, meaning ratification also hangs on legislative elections in June.
As it stands, the treaty’s rigid deficit-reducing requirements seemed to go in the opposite direction from the E.U.’s pledge to focus on economic growth and jobs. The European leaders, at least in their declarations, gave themselves difficult-to-reconcile goals: reducing debt while at the same time spurring the economy.
The conservative French leader, President Nicolas Sarkozy, nevertheless expressed “immense relief” at the way things are going. In his view, he said, European countries are getting a grip on the poisonously high government debts that had left Greece in de facto bankruptcy and had threatened to undermine the entire continent’s banking system and its common currency, the euro.
“This is the first summit since August 2011 that is not a crisis summit,” he said at a briefing. “We have not pulled entirely out of the crisis, but we are turning the page.”
The Swedish prime minister, Fredrik Reinfeldt, also noted that this was the first summit that was not surrounded by a crisis atmosphere and reports of possible financial collapse among European governments. At the same time, German Chancellor Angela Merkel, a dogged champion of budget discipline, called for caution even as the emphasis shifted to growth.
“We remain in a fragile situation,” she told reporters at a briefing. “This crisis is far from over.”
As reasons for his optimism, Sarkozy cited the lowered interest rates being paid by Spain, Italy, Ireland and France when they go to the markets to place their loans. This was made possible in large measure, he said, by the injection of about $1.3 trillion in loans to European banks by the European Central Bank, a rush of ready cash that has lubricated the banking system and restored a measure of confidence that made sovereign debt issues less precarious.
Against that background, he said the time had come to bear down on economic growth. “The solution cannot be simply in budget discipline,” he declared.
As if to illustrate his point, a giant yellow banner erected by Belgian union activists hung across from the entrance to E.U. headquarters where the leaders were meeting. “Enough is enough,” it said in scarlet letters. “Alternatives do exist for employment and social justice.”