European left targets German compact in move to gather support

Fri, Jan 27, 2012, 00:00

THE EUROPEAN left, increasingly consigned to the continent’s political margins, is taking aim at a German-inspired fiscal compact in a move to draw distinctions with centre-right parties and reverse its fortunes.

The most prominent example was a campaign pledge yesterday by François Hollande, the socialist candidate vying for the French presidency, to renegotiate the compact if elected.

Other socialist figures from Belgium to Sweden have also criticised the compact. Their chief complaint is that the treaty, which was drafted at Berlin’s insistence, is an attempt to institutionalise austerity measures across Europe at the expense of investment and job creation.

Their message has been given added punch by new forecasts showing the euro zone economy sliding toward recession, particularly those members on the southern periphery where double-digit youth unemployment has become a crisis.

“The ‘austerity-only’ approach is not working. It has been applied for three years now,” said Sergei Stanishev, the president of the party of European socialists. In a rare departure for a European socialist, Mr Stanishev suggested the continent could take a lesson from the US, where the government deployed a large stimulus package to prop up the economy and limit unemployment.

The compact, which was put forward by Berlin in December, would make such expansionary policies difficult by enshrining tough budget rules in a treaty.

European heads of government – except for the UK’s David Cameron – are expected to sign a draft in Brussels on Monday, leaving little room for substantive changes. However, the document will still require ratification by member states, a process German diplomats estimate could last a year and one that Mr Stanishev has vowed to contest.

A strong showing by Mr Hollande in France, the EU’s second biggest member, could alter the debate over the compact and the austerity it implies.

Austerity is already a potent political issue in other member states.

In the Netherlands a conservative minority government relies on pro-European leftist opposition parties to gain approval for euro zone rescue measures, but the biggest pro-European leftist party, Labour, is now haemorrhaging support to the eurosceptic Socialist party. – (Copyright The Financial Times Limited 2012)