Upturn
The conclusion yesterday by the EU ministers for economic affairs and finance (Ecofin) that the European economy is following the upward trend of the USA, reinforces the view that the Continent will be able to achieve needed progress in the area of employment, where it has long lagged behind the Americans. It should be remembered that job creation has become the EU’s primary goal, not only in order to alleviate social pressures, but also in order to lessen the strain on the social security system and a benefit-oriented social policy. Positive estimates on this front fuel broader optimism in Europe. The optimism from Ecofin, however, comes with reservations – particularly the point that, despite EU efforts, the US upturn has been greater, underscoring that it maintains the edge in flexibility and the creation of new jobs. For Europe – where economic prosperity is not only a precondition of social order but a fundamental prerequisite for political integration – the US lead is a constant cause of concern but not an absolute model. Indeed, the 15 EU ministers made sure to mention that any economic upsurge is sought not via the social state’s disorderly retreat and the adoption of the American model, but along lines greatly preserving the model of Rhine capitalism. With this aspiration hindering the pursuit of American performance, Europe is realizing – as Petro Solbes, EU commissioner for economic and monetary affairs, has pointed out – the need for immediate structural changes to modernize the labor market through a series of tax and insurance incentives, along with the rationalization of legislation and a reduction in public debt. EU leaders are realizing that deregulating the labor market can boost growth and employment, so that market growth can compensate for temporary losses in income or payroll taxes. For our country, which is lagging in genuine convergence with the EU, the need for structural reform is imperative. In this light, Nikos Christodoulakis yesterday emphasized the fact that Greece has to move in this direction without the slightest pressure from Brussels. The question is whether there is this kind of commitment. Greece’s finance minister confirmed the government’s intention by invoking the nascent tax reform and the renewal of the debate over the social security reform. These are no doubt positive signs, yet it remains to be seen whether they will yield fruit. Moreover, further steps are needed. The country has to proceed with more substantial market liberalization and the reduction of public debt in order to catch the European train, as it, in turn, is struggling to compete with the American one.
