Draghi’s growth babble is no retreat on austerity

April 26, 2012

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Is it still possible to mention the word “growth” without becoming a hostage in the French presidential campaign? Mario Draghi, the European Central Bank president, has been hijacked by the French socialist party because he has called for a euro zone “growth compact”. Presidential candidate François Hollande sees it as a sign that his ideas are gaining ground. But Draghi’s statement to the European parliament wasn’t a seismic shift. More important, what he means by growth compact has nothing to do with what Hollande plans to do if elected.

The upcoming conflict within the euro zone is not, thankfully, whether growth is good or not. Everyone agrees it is. There is also unanimity on the need for fiscal discipline. What sets Hollande on a collision course with Germany, the ECB and most of France’s euro zone partners is his belief that growth will come from the rest of the world while France avoids the painful domestic reforms which are underway in most of Europe.

France has the highest hourly labour costs of any major European economy, according to EU statistics, updated this week. They have risen 39 percent in the last decade, twice as fast as in Germany. True, that data doesn’t take into account productivity, which is high in France, but the deterioration in the current account shows the country’s competitiveness has deteriorated.

If Hollande keeps thinking that this is not a problem, or if he thinks it is but feels obliged to lie to the French about it, there’s no way to find common ground with Mario Draghi. Even though the expression “growth compact” may sound new, there’s nothing there that hasn’t been said, over and over, by central bankers: governments must reform, and the longer they wait, the more painful it will be.

Euro bonds, big investment programmes and German stimulus would all help, but they will not spare France the pain of reform. If Hollande the candidate keeps ignoring that reality, Hollande the president will hit the wall head first.


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Mario Draghi now calls for a growth compact? Come on, what does he know about “growth”?

As a Chairman of the Financial Stability Board he, like most regulators of the current crop, showed an incredible risk adverseness, reflected in allowing very low capital requirements for banks when financing the carbohydrates which were perceived as safe, like Greece, in contrast with the much higher capital he required banks to have when financing the “risky” proteins such as the small businesses and entrepreneurs.

Posted by PerKurowski | Report as abusive

Everyone agrees that growth is good?
Hi, I’m Leviathan, aka guv’mint.
Although I work very hard to let the sheeple believe I am interested in their welfare, what I really want is to control them.
Such control is easier when everything (or Being itself) is, as Parmenides, 5th century BC, demonstrated, stable.
How dare you argue that everybody, including me, is an admirer of Heraclitus, same century as Parmenides, holding that everything is or rather should be in the stormy flux of growth and thus of change or instability?
The lunatic Aristotle, 4th century BC, emphasised the real meaning of relative non-being found in things when he discovered a real principle of limitation, namely, potency. Thus, he formulated the Principle of Non-Contradiction (PNC) “Something cannot be and not be at the same time and in the same sense.”

President Hollande thinks that growth will come from the rest of the world while France avoids the painful domestic reforms which are underway in most of Europe?
Contradictions can exist in reality but they cannot be grasped by the mind.
The reason for this is that the PNC is not applicable to reality, only to human thought.
But Hollande’s socialist mind cannot grasp the PNC?
The law of the excluded middle says that growth is good or not good – “tertium non datur”.
But if Hollande’s mind does not accept the PNC, it cannot take a position as to the desirability or not of growth.
If Hollande wants to govern
(Victor Hugo clearly demonstrates in “The Man who Laughs”, “L’Homme qui Rit”, that this verb has a naval origin),
it will be easier for him to do that in an environment of stability, not a stormy environment of growth and instability.

“Canst thou remember A time before we came unto this cell?”
(William Shakespeare, “The Tempest”, 1.2)

Posted by Ivo_Cerckel | Report as abusive