“European governments loosened the shackles on national budgets as the euro-area recession deepens and unemployment climbs, with pro-growth appeals coming even from German Chancellor Angela Merkel, the leader most closely associated with austerity.
European Union leaders endorsed “structural” budgetary assessments, using code for granting countries such asFrance, Spain and Portugal extra time to bring down deficits. Still, balanced budgets remained the goal and there was no talk of large-scale spending programs or bond issues.
“If there is too much austerity, there will be too much unemployment,” French President Francois Hollande said at an EU summit in Brussels late yesterday. “Flexibility is necessary if we want to make growth the priority.”
The euro zone’s economic slump has shoved aside the financial crisis as the bloc’s biggest headache, leading the EU to push back deficit-reduction deadlines and making it perilous for politicians to wrap themselves in the flag of austerity.
European leaders are cloaking the easing up on the fiscal reins in language designed to reassure investors who have driven bond yields lower since mid-2012. They labelled the policy “differentiated growth-friendly fiscal consolidation,” with deficit targets set on a country-by-country basis.
