The big question for the EU in 2012 is not only: “will it solve the debt crisis?” It is also: “will it survive the solution?” Lurking behind the debt crisis is a growth crisis, in particular with austerity policies imposed across Member States, along with a competitiveness crisis for Southern Europe. These three crises will fester even if the debt-related one were to be resolved by the “big bazookas”.
So how does the EU restart growth across Europe and rebuild competitiveness in the South, in particular in light of a “fiscal compact” that prescribes one-size-fits-all budgetary austerity for all euro zone members? The devil is in the details – and those details involve not just economics but also governance and politics.
The full version of this article was published as a BEPA Monthly Brief (BEPA Monthly No. 52) and is available on the European Commission’s BEPA (Bureau of European Policy Advisors) website. [Download PDF]