x Abu Dhabi, UAEThursday 27 July 2017

Europe puts focus on new jobs and growth

EU leaders turn away from crisis management to find ways to stimulate growth and reduce unemployment.

LONDON // European leaders began talks last night intended to put growth and job creation at the heart of new attempts to steer a path out of economic crisis.

Even though financial markets have regained relative stability, the European Union (EU) summit in Brussels coincides with general gloom about the cycle of austerity and debt afflicting the European Union in general, and the euro zone in particular.

The fighting in Syria was also due to be discussed.

But the stream of bad news on the economic front has concentrated European minds and the need to find ways of stimulating growth was the dominant issue as the meeting began.

Euro zone finance ministers met before the summit to approve Greek steps to comply with tough requirements attached to its second bailout, worth €130 billion (Dh635bn), though a final decision rests on the private sector's willingness to accept losses on investments and will be taken next week. Earlier, the Greek parliament defied street protests to approve cuts to its health budget.

Most EU delegates are expected to sign up today to a new treaty providing for tight fiscal control to avoid the need for such drastic remedies again.

Britain and the Czech Republic are the exceptions, though the Irish Republic said it will hold a referendum to ratify it.

Energetically promoted by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, the treaty is designed to prevent any repeat of the debt that crippled the Greek economy and spread to other members of the single-currency area.

"I'm sure you will agree, a little less drama will do no one any harm," José Manuel Barroso, the Portuguese head the EU executive, said after meeting the Greek prime minister, Lucas Papademos, before the two-day summit began.

His comment reflected a wish on the part of EU leaders to move away from the crisis management of much of the past two years and address key issues such as unemployment.

But doubts remain about the resolve of individual countries to follow the debt-cutting recipes cooked up in Brussels. Spain, in particular, is seeking greater understanding, pleading that further cuts to reach deficit targets - 4.4 per cent of gross domestic product - would inflict serious damage on an already weakened economy. A draft statement placed before delegates called for their support for an urgent review of priorities to boost job prospects.

Unemployment is above 10 per cent in both the 17-nation euro zone, where it has climbed to 10.7 per cent, and the 27-member EU.

Among the 24 million people out of work in EU nations are an alarming number of young people, including even those with good academic qualifications. Youth unemployment in Spain is approaching 50 per cent.

There remains significant difference of opinion on how to create jobs and, as important to so many struggling businesses and governments, keep them.

Mrs Merkel stressed the need for greater competitiveness.

"Only if Europe manages that will we have a future in which we are able to shrink our budget deficits and safeguard our wealth and jobs in Europe," she said yesterday.

Differences on how to achieve growth have echoes in the battle on economics being drawn in the French presidential election.

The socialist favourite François Hollande, promises to boost spending to get the economy moving, a pledge ridiculed by Mr Sarkozy's centre-right as threatening France's recovery.

But Mr Hollande is not alone. While some economists urged continued prudence, others have said further government budget cuts will only deepen the crisis and even lead to more sovereign debt.

The new socialist prime minister of Belgium, Elio Di Rupo, recognised these divergences. But, speaking before the summit, he indicated that after many months of concentrating on achieving financial stability and budgetary consolidation, jobs should be the key priority.

The EU president, Herman Van Rompuy, said: "This crisis and some remedies put social cohesion at stake. It can also damage the European idea itself.

"That is why we have to tackle inequalities and poverty."

Among brighter developments for Europe, the governor of the Bank of England, Sir Mervyn King, said a run on European banks was averted with the help of a European Central Bank scheme to grant an additional €529.5 billion in low-cost, three-year loans to 800 banks.

This is on top of the injection of funds approved in December.

foreign.desk@thenational.ae

* Additional reporting by Associated Press and Reuters