European Union governments and institutions must take immediate action to promote growth and jobs creation as countries are tired of austerity, European Council President Herman Van Rompuy said this week.
Taking these measures is more urgent than anything, he told a conference in Portugal. After three years of fire-fights, patience with austerity is wearing understandably thin.
Still, he said Europe cannot completely veer off the course of reducing budget deficits and has to find the right path between deficit cuts and pro-growth measures, while continuing with structural reforms and ensuring financial stability.
Van Rompuy's remarks add to a growing chorus of Euro zone policymakers acknowledging that fiscal rigour to contain the region's debt crisis must be tempered with steps to stimulate economies experiencing feeble growth and alarming levels of unemployment.
Van Rompuy said the easing of deficit targets for countries like bailed-out Portugal, as decided in March, or giving countries more time to repay rescue loans was the kind of healthy pragmatism he supported for other European countries.
He called on the European Central Bank and European Investment Bank to work to ease the key problem of funding strains of small and medium-sized companies while banks are still reluctant to take on further credit risk. He did not specify what other growth measures should be taken.
Another step that should help the EU prevent future crises is the completion of the banking union to separate sovereign risks from financial sector risks.
We can't afford to have a half-built system ... I urge legislators to agree on harmonising national resolution mechanisms and set up a deposit guarantee scheme, he said.
Van Rompuy praised the austerity efforts of countries like Portugal and Ireland that allowed “restoring the confidence in the Euro” and maintaining the Euro zone intact.