The EU, and the world economy, need real growth, as G8 leaders kept saying this weekend. But growth will come not from more borrowing but from better opportunities for the private sector to create wealth.
G8 challenge is to set conditions for future growth
Across Europe, recent elections in several countries and opinion poll results elsewhere demonstrate vividly that there is little public enthusiasm for so-called "austerity" policies.
Sovereign debt has undermined the euro and shaken the global economy, but European governments trying to fight back by balancing their budgets have smashed headlong into a wall of voter disapproval.
So this weekend's G8 summit at Camp David has been focused on growth, which may appeal more to voters.
To be sure, the world needs growth. Only boom times can reverse the contraction that menaces social and political stability in the worst-affected countries. In Greece, for example, reduced government spending and higher taxes led to a voter revolt precisely because these measures did not offer any plausible promise of leading to real growth in the foreseeable future. On top of a dysfunctional economy and unsustainable social welfare spending, the financial crisis has forced ordinary Greeks to queue at soup kitchens as prospects grow every more bleak.
Clearly, Greece and its neighbours need another solution. But an emphasis on growth could go awry. Too many voters - as well as political leaders - cling to the notion that incurring still more sovereign debt, under one guise or another, is the way to get economies back into gear.
That's wrong: sovereign debt is the problem, not the solution. Indeed Europe's so-called austerity of recent years is a misnomer: OECD data show that of the 17 euro-zone countries, only tiny Estonia actually recorded a budget surplus in 2011. Together, the 17 merely trimmed their net deficit from 6.2 per cent of GDP in 2010 to 4.1 per cent last year. If you're deeply in debt, reducing your new borrowing by one third is hardly austere.
There is however another path to growth, one that actually leads there. This involves unleashing the wealth-creation power of private enterprise by, for example, letting labour markets operate more freely, allowing more agricultural competition and sharply reducing the regulatory burden on companies.
Of course, some of these measures, too, will be resisted by labour unions and special interests. Any change that could put environmental protections at risk will also be widely assailed by groups across Europe.
But EU countries that take this approach to growth, while still limiting spending as tightly as voters will let them, have a chance to create conditions in which business can create the growth the world needs. That is how Greece, and the EU's other ailing economies, will be able to escape a cycle of unsustainable debt.