(first appeared in Social Europe)
Never miss a party – especially one you’ve been desperately waiting for for so long. This much the authorities in Europe’s currency union clearly understand. As soon as Eurostat had released its first estimate for GDP growth in the spring quarter in mid August (1st estimate here), which was missing the by now customary negative sign, the champagne began to flow, it seems, accompanying all-round self-congratulatory shoulder slapping.
For instance, Spain’s economy minister Luis de Guindos confidently noted that “Spain will show clearly the quality of the policies implemented in the eurozone” (FT.com 4 September 2013). And European Commission President José Manuel Barroso declared in his State of the Union Address on 11 September 2013 that “the facts tell us that our efforts have started to convince.” Germany’s finance minister Wolfgang Schäuble also joined the chorus, just in time for the federal election, proudly announcing in The Financial Times that “while the crisis continues to reverberate, the eurozone is clearly on the mend both structurally and cyclically.” Dr Schäuble declared with poise that “what is happening turns out to be pretty much what the proponents of Europe’s cool-headed crisis management predicted. The fiscal and structural repair work is paying off, laying the foundations for sustainable growth,” and then went on to boast that “despite what the critics of the European crisis management would have us believe, we live in the real world, not in a parallel universe where well-established economic principles no longer apply” (“Ignore the doomsayers: Europe is being fixed,” FT.com 16 September 2013; see comment by this author: “The euro crisis is not even close to being over, Mr Schäuble”).
Apparently Germany’s “stability-oriented” prescriptions for the land of the euro are now doing their magic just as Dr Schäuble had always promised they would. Fiscal contractions are now proving expansionary after all, just with a little bit of a delay, while growth-enhancing structural reforms are beginning to bear fruit too, it seems. The euro authorities are making sure though not to miss any chance at emphasizing that more of the same medicine will be needed to do even more good going forward.
Perhaps this is a good time then for a reality check. continue reading…