Jean Pisani-Ferry thinks it is time for Europe's leaders to put growth at the top of the to-do list. The last six years have been brutal for GDP across the EU. Several member-states are now looking at GDP per capita that is well below where it was before the Great Recession, and even the model economy, Germany, has seen only anemic" growth in GDP. Writing at Project Syndicate , Pisani-Ferry argues that EU policymakers first need to make growth a priority, and then they need to come together to build a cohesive plan: In the eurozone, the hope is that calmer sovereign-debt markets, slower fiscal adjustment, and supportive monetary policy by the European Central Bank will help trigger a sustained recovery. This may be the case, but the recovery that is now expected will not suffice to offset the adverse consequences of the last six years. The productivity gains that failed to materialize during this period are lost forever: many people who have experienced long-term unemployment or have left the labor force are unlikely to return to work, and Europe will be lucky if productivity growth accelerates somewhat and approaches pre-crisis trends – better than nothing, but hardly satisfactory. Things are completely different in the United States, where growth is on everyone’s agenda: the Federal Reserve is targeting an employment rate below 6.5%, and companies have used the recession as an opportunity to reorganize and become more efficient. The lasting adverse effects of the 2008 shock are likely to be much smaller there than in Europe. So, why is Europe not doing more to return to growth? European leaders would probably say, first, that they have been forced to address more urgent matters since the Greek crisis erupted in 2010. But, while it is true that much policy attention has been devoted to fighting financial fires, this is not a sufficient answer: since the summer of 2012, when ECB President Mario Draghi convinced markets that the eurozone would not break up, Europe has had enough breathing space to address the growth imperative, but has barely done so. The second explanation is that there is agreement on the goal but not on the means. Again, there is some truth to this. Keynesians argue that Europe would grow if only policy were focused on generating aggregate demand; they blame precipitous fiscal consolidation and insufficiently aggressive monetary easing for the loss of momentum. Their opponents, by contrast, see structural weaknesses and internal imbalances as the major impediment to growth; for supply-siders, it is the slow pace of economic and social reforms that is to blame. This lack of consensus on the nature of the problem arguably hinders agreement on a solution. But, again, this is not an entirely convincing explanation. Disagreements such as this have arisen before – and not only in Europe. Given sufficient will, there could be ample room for compromise. As the Nobel laureate economist Paul Samuelson famously said, the reason we have two eyes is to keep one on supply and the other on demand. Read Europe’s Elusive Growth Consensus here .
Filed under: jobs, global business, GDP, EU, european union, european central bank, project syndicate, great recession, mario draghi, european unemployment, GDP per capita, jean pisani-ferry