Growth and/or Austerity?
Since the Greece and France elections of May 6, a change in the EU economic policy discourse has occurred. “Growth” has made it on the agenda, but it is still contested, what this might mean in reality: structural change of labor and product markets, or better use of existing EU structural and cohesion funds, or an active industrial policy, or a slowing down of the agreed-upon timelines for budget consolidation, or – horribile dictu – extra new money.
A macroeconomic viewpoint would argue that if total private effective demand is insufficient, a move towards full employment would require the government to step in. This would mean growth-oriented public expenditures for easily and fast to be implemented infrastructure investments for the short run; for expenditures on education and R&D in order to safeguard future competitiveness and growth, for government stimulus into “green investments”. Structural change must occur.
Crisis resolution would further require new banking regulation, a “banking union” with EU-wide deposit insurance and bank resolution funds; a “financing union” in some form of Eurobonds; a “fiscal union” by enlarging the stability-oriented measures by a joint tax authority. A more complete EU-wide economic policy model, targeting stability plus high employment plus fair income distribution and regional catching-up will need to be developed in the future.