European Leaders Stick to Austerity Course

http://www.nytimes.com/2013/03/15/business/global/european-leaders-stick-to-austerity-course.html

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BRUSSELS — Jeered by angry protesters demanding an end to austerity and shaken by a resounding rejection of their economic strategy from Italian voters, European leaders gathered for an economic summit meeting Thursday amid few signs that the bloc’s policies were healing the twin blights of rising unemployment and recession.

Instead of bowing to a rising anti-austerity tide, however, leaders seemed determined to stay the course, insisting that only budget cuts and other measures to restore financial stability could return the continent to economic growth and create jobs.

Speaking as thousands of protesters gathered just out of earshot in a nearby Brussels park, Herman Van Rompuy, the president of the European Council, the body that organizes the leaders’ summit meetings, emphasized “green shoots” of recovery and said growth was returning, albeit slowly.

Officials of the European Union have repeatedly predicted a return to growth, only to be disappointed by data showing rising unemployment and continuing recession in the euro area.

The economy of the 17-member euro zone is expected to shrink for a second consecutive year in 2013, and growth for the whole of the 27-nation European Union is forecast to be about 0.1 percent. Unemployment in Spain and Greece, the hardest-hit countries, has soared above 25 percent.

Mr. Van Rompuy acknowledged “social distress” and said the success of anti-austerity and anti-establishment parties in the recent Italian elections was something that the leaders needed to consider. But he insisted that the departing Italian prime minister, Mario Monti, who was roundly defeated in the elections last month, had done “an excellent job” and that Italy and the European Union should “stick to the same general direction of the last 12 months.”

Italy is effectively without a functioning government after the Five Star Movement, led by Beppe Grillo, a comedian turned activist, made stunning gains in both houses of Parliament in the elections. Five Star has rejected an appeal by the Democratic Party to work together to lead the country. Without an alliance, the Italian government could limp along for as long as a year, political analysts say, before a likely collapse would force new elections.

The Brussels meeting is meant to focus on the tougher budgetary oversight agreed upon over the last two years to combat the kinds of extreme debt and deficit problems in many countries that nearly brought down the euro currency union. Leaders were also expected to endorse a strategy that should give France, Spain and Portugal more time to meet their deficit-reduction goals, on condition that they stick to a path of cutting debt.

Protesters, even if they were aware of such concessions, were clearly unconvinced.

“All they do is cut, but we need jobs,” said Michael Mercier, a worker at a Belgian prison for juveniles who took part in an anti-austerity rally organized by trade union groups in Parc du Cinquantenaire, near the site of the summit meeting and the headquarters of the European Commission, the bloc’s executive arm.

“This is all the fault of the E.U.,” said Mr. Mercier, who added that the way the bloc was run mixed “too many different things in the same big pot, and this causes problems for everyone.”

One group of demonstrators managed to enter an annex of the European Union’s principal economic policy-making arm, the European Commission’s Directorate General for Economic and Financial Affairs, and staged a protest meeting in the cafeteria.

“We occupied their building to denounce the misery they are imposing on millions of Europeans,” said Michel Vanderopoulos, a spokesman for the group, which organized the protest, called “For a European Spring.” He said those who took part came from Belgium, Germany, Italy and Denmark.

The annex houses some of the officials who form part of the “troika” of international lenders detested by many people in countries like Greece and Portugal for its role in demanding painful belt-tightening in exchange for bailouts.

A spokesman for the commission said the protest lasted about 15 minutes and did not involve any violent confrontations. “The Belgian police arrived on scene, and the protesters left of their own accord,” the spokesman said.

At the meeting, the increasingly acrimonious dispute over austerity pitted those who favor budget discipline — the European authorities and leaders of countries like Germany and Finland — against countries like France and Spain and groups like trade unions, which favor more government spending to promote growth.

The cracks were visible at the same news conference where Mr. Van Rompuy spoke, after a “social summit” of European officials, business groups and trade unions ahead of the main meeting.

“The doubt about the benefit of the European Union is showing more and more,” said Bernadette Ségol, the general secretary of the European Trade Union Confederation. “The burden is being put on the people. Unemployment is up and up and up every month. When is the growth going to come? What are we going to do to get it?”

Ms. Ségol called for the political will to increase investment and halt the focus on reducing deficits. She implored the leaders gathering in Brussels to recall that “we are dealing with people; they have feelings, and they also have the right to vote, and this is something that maybe cannot be explained in tables or figures.”

The dour forecasts have served to sharpen the debate over whether the emphasis on austerity has generated a painful cycle in which government cuts sap tax revenues and consumer demand, worsening an already bleak outlook.

The concern about growth and jobs is also prompting a return to calls for Germany, with its strong economy, to do a good deal more to help its struggling neighbors.

That is a topic that Angela Merkel, the German chancellor, has sought to avoid before national elections in September and amid continued concerns among voters that financial support for the euro area from German taxpayers could badly dent the nation’s resurgent prosperity.

Arriving at the meeting, Ms. Merkel sought to emphasize the efforts the European Union had already made to fight joblessness.

“We have decided on a growth pact in the summer of last year, and now this growth pact has to be filled with life,” Ms. Merkel said. “The money is there, but it has to reach the people, so the young people in Europe get jobs and we still do everything to become competitive and grow.”

Guntram B. Wolff, the deputy director of Bruegel, a research organization, wrote this week that it was critical to support efforts like programs to create jobs for youth. But in addition, he said, “Germany will have to play a role” to stimulate demand in the region and enable other members of the euro area, like Spain, to benefit from export-led growth.

“The euro area’s recession has deepened significantly according to all available indicators,” Mr. Wolff warned. “Urgent action is needed to prevent that the recession turns into an outright depression.”