Rome – While German Foreign Minister Guido Westerwelle is prepared to combine budget discipline with an eye to growth, German Chancellor Angela Merkel has told the world, through her spokesperson, that the Stability Pact signed by 25 of the EU’s 27 member states is a consolidated achievement not open to further negotiation. Yet French Socialist Francois Hollande was elected to the presidency by 51.62 percent of his compatriots after pledging to renegotiate the stability agreement in an effort to foster growth rather than merely enforcing austerity. What is the take of Marta Dassu, a foreign under secretary in the Monti government, on the issue?
[Il Foglio] Does Hollande want to reopen the fiscal pact?
[Dassu] No, I believe that what he is going to attempt to do above all is to mediate with Berlin. And I think that the only mediation possible involves supplementing the Fiscal Compact with a pact or a declaration — a supplement, as I said — on growth. That will be a good thing for Europe. Pierre Moscovici, Hollande’s campaign manager, already reassured Berlin on that score before the Socialists’ election win. Thus France is not calling for the whole thing to be renegotiated, tossing into the trash can a treaty on which the German chancellor has insisted with such determination. Hollande’s France, just like Italy in fact, is convinced that budget discipline is a necessary medicine (given that both countries are still in a risky position on the markets), but that it is not sufficient on its own. Europe must also stimulate economic recovery through a series of tools ranging from fresh funds for the EIB to project bonds and to the deregulation of the service industry, and so forth. Hollande places the stress on more of a Keynesian approach in the traditional sense, while Monti places greater stress on new European investments, on market deregulation, and on structural reform.
But the meat of the matter is that, once Germany has been reassured where budget stringency is concerned, it must in turn make a few concessions to the gasping economies in the rest of the euro zone. And indeed it would be in its interest to do so. This is no new debate, and against this backdrop we must adopt a balanced approach to the Hollande factor: Hollande has won, long live Hollande — but without kidding ourselves that that can foster any easy shortcuts. It is still going to be difficult to drag Europe out of its debt crisis and out of recession, in light of the existing structural imbalances.
[Il Foglio] What kind of a compromise are market pressure and the force of reality going to allow?
[Dassu] The broader setting is clear and it consists of the Fiscal Compact plus a strategy for growth. But the details are, of course, far less clear; and it is the details that are going to be important. This debate has been going on for some months now, but it is hotting up right now and Rome is playing a leading role in it. It will be interesting to see how the chemistry works between Merkel and Hollande. When all is said and done, the chemistry between Merkel and Sarkozy was not brilliant. If history teaches us anything at all, it is that a combination of the German CDU and the French PS has often produced good results. Monti has all the right credentials to be influential, both because he is in a position to mediate between Paris and Berlin in cultural terms, and because he enjoys immense personal prestige with the Community institutions. And that is going to carry more weight than people think in terms of implementation, of monitoring, and of assessment. Also, I would add something that people may have overlooked: The result of the elections in Schleswig-Holstein shows that the SPD is back in the picture. It is going to play a crucial role when the German parliament comes to ratify the Fiscal Pact. In short, aside from all the individual statements and comments, things are starting to move in Berlin too.
[Il Foglio] But what is going to change for Italy with Hollande?
[Dassu] It is not Hollande who can change Italy. We ourselves are the ones who can change Italy. But if it acts in conjunction with France, with Germany, with Spain, and with Brussels, Italy can attempt to respond to the growth challenge before it is too late. Social inequality is clearly dramatic in many of the European Union’s member countries. The real political divide in Europe today is not only, or so much, between the Right and the Left. It is between constitutional, pro-European forces (be they center-left or center-right) and the heterogeneous antisystem parties, which are also anti-European. Ironically, political Europe has come into being without our realizing it, in the midst of a financial crisis that has also spawned its monsters. If we want to save the Europeans along with the euro, we have to beat the recession.
