All euro area members have now adopted the same economic policy, in the search to improve their competitiveness by supply-side policy. This strategy is the only one which could replace, under the single-currency system based on the euro, competitive devaluations; it aims at lowering prices and salaries, in order to improve the response to external demand, and thereby restore, hopefully, purchasing power of wages, growth and employment.
France was the last country, after Germany, Italy, Spain, and all the others, to adopt explicitly this strategy. It was the right decision; not doing so would have been suicidal: our industry was about to lose all ability to compete with the other European countries, including those with export capacity which until then was far behind that of France.
For the time being the strategy does not work; not in all euro area countries, not in all dimensions of the crisis: everywhere unemployment does not fall; growth does not return; deficit remains high; debt-to-GDP ratio goes up inevitably. What is more serious is the fact that commercial banks are not emerging from the dire situation in which they found themselves; private and public investment are slowing; foreign investors are moving away. And if some euro area countries are winning markets outside, it is mostly to the detriment of another member nation, as Spain is now doing against France, and Germany against all other European countries.
This is a road to disaster: it will become clear early on that rigour will solve none of the specific problems that citizens face in their lives. The anti-European diatribes will then repeat that they said so, that austerity will only lead to disaster. There will be a revival of parties advocating the return to debt, deficit, headlong rush forward, and even, an exit of the euro to adopt an explicit policy to support demand and competitive devaluation. We are already seeing parties advocating this policy line scoring big in polls, taking on different forms, in Greece, in France, in Italy. The policies they propose, if by misfortune were to be implemented, will only sustain the illusion for a limited time: higher wages, rise in public deficits, a stop to dismissals. But very quickly, they will lead to more public debt and subservience to the lenders, who will impose a return to rigour, under much worse conditions. It will be too late. In this case the damage is irreversible.
One single strategy is crucial to avoid this: complement the necessary policy of rigour of each of the debt-distressed nations by means of a reviving policy of a euro area, that has no debt.
Too often, it is forgotten that the eurozone, as a legal entity, has no debt. And, therefore it has a borrowing capacity of at least 1000 billion euros, to finance, with European bonds, productivity-enhancing investments, private and public, that neither indebted countries, nor European banks, for lack of sufficient capital, could finance. In addition if the euro area has a coherent strategy, and concerted on the markets, leading to a relative fall in the value of the euro against the US dollar, the return to growth in Europe is assured.
In order to achieve this, a coherent strategy needs to be defined and implemented among the only four major credible players of Europe today: France, Germany, the European Investment Bank and the European Central Bank. If they are able to agree, growth will return very soon in Europe; If they are not able, its decline is certain.
It is therefore urgent, for the ECB, to understand that its very future, and that of the currency under its care, requires a strategy, much bolder than its current timidity, saying that the decline of the euro against the US dollar would be good, that bringing inflation to under 4% is welcome, that Eurobond issuance would usefully complement the instruments already at its disposal.
As for the BEI it is time to realize that the time for the defense of its triple-A rating has past, by refusing to invest in the countries that have lost theirs, and on the contrary to risk it, by mass financing projects in these countries.
For Germany, the time has come to uphold the idea that if the scenario of the worst materializes, the euro reverted to the deutsche mark will go up so high that no sector of the German industry will be competitive.
Now lastly, for France the time has come to recognize that it is her responsibility to dare to propose such a strategy, that Germany, and the two European Banks, can only accept.
Such an initiative must be taken as quickly as possible. Very quickly. In March at the latest. And therefore it is in February that France must propose it. If she is unable to convince her partners, she will have to abandon, sick at heart, the desire to find sustainable balances, that she has however just committed herself courageously to, for the sake of the principle of solidarity, that will have ceased to exist.