It is economic performance – not the European Union budget or any proposed constitution – that will determine the fate of the “European Project”.
After all, Hitler came to power in 1933 due to “ordinary economic voting behaviour” when the mainstream parties’ economic agendas were unconvincing, not because a majority of German voters then embraced Nazi ideology.
Adam Posen, Financial Times, August 3 2005
The writer, a senior fellow at the Institute for International Economics, is author of the forthcoming book, Reform in a Rich Country: Germany
Similar feelings of frustration about economic change without evident benefits are rife in western Europe today. Echoing the 1920s and 1930s, competitive pressures on lower-skilled workers and the once-protected petit bourgeoisie are blamed on international capital and on inequitable global treaties.
It is intellectually sound to argue that only structural reform will raise the growth rate sustainably, but it misses the point. Labour reforms and fiscal consolidations, even when necessary, are contractionary in the short-term. Responding to populist discontent by simply telling the dissatisfied to be patient would reinforce the image of an out-of-touch European elite and open the door to worse outcomes.
Of course, if growth were strong in the big eurozone economies, illiberal voices would not be a threat. Though there is no quick fix for European growth, recent political events and Europe’s history both suggest that it would be ill-advised to continue doing nothing until the benefits of structural reform and wage pressures arrive.