EU leaders on tightrope between austerity, growth

European Union leaders tried on Thursday to find a balance between austerity and growth policies amid rising fears of social unrest as unemployment soars and Europe’s economy remains in the doldrums.Germany, the bloc’s strongest economy and paymaster, is holding to a hardline on austerity, insisting that only discipline ensures real growth while France and several others want some leeway so as to ease the immediate pain.The debate is more than academic. A brash anti-austerity party won a stunning 25 percent of the vote in last month’s Italian elections, a warning for German Chancellor Angela Merkel who faces polls later in the year.Unions have already set up camp across from the summit venue at EU headquarters in Brussels, aiming to make their point amid a heavy police presence with huge banners proclaiming “Austerity Pact, No! Solidarity Pact, Yes!”“We do not need another summit where EU (leaders) ... try to sugar-coat and deny the harsh reality,” said Hannes Swoboda, head of the Social Democrat group in the European Parliament as leaders arrived for a 1600 GMT start.“We need action and new tools to get Europeans back into jobs and our economies back on track,” Swoboda said.EU President Herman Van Rompuy said that if the worst of the debt crisis appeared over, leaders were still meeting against a backdrop of “social distress.”It is not a choice between austerity and growth, Van Rompuy said — the EU has to make the grade on all fronts. “In the short-term, we cannot turn a blind eye to the social emergency in some of our countries,” he said, highlighting the danger of soaring youth unemployment, which now runs at more than 50 percent in Greece and Spain.One EU official said the vote outcome in “Italy has made a lot of people think.”The problem, he added, was that governments still need to balance public finances after years of overspending, but austerity and belt-tightening cannot be the only response.“You need to implement these plans carefully and with flexibility, otherwise there is no growth,” the official said. “If there is no growth for 10 years then you can’t pay back your debt ... there is not much room for manoeuvre.”A draft of the summit conclusions obtained by AFP says that given the currently “unacceptably high levels of unemployment” — expected to hit an unprecedented high of around 12 percent this year — it is critical to support growth “as a matter of priority.”The key to stabilising public finances must be “growth-friendly fiscal consolidation”, it adds.Another EU official said this language offers the possibility that targets can be eased or adjusted, with leaders trying to nail down “what growth-friendly fiscal consolidation really means” in practice.