From Austerity to Prosperity: Europe in a Time of Crisis

The G8 summit last weekend called for Greece to remain in the eurozone, a goal that seems harder to achieve than ever as the Greeks are set to return to the polls a second time after a first inconclusive election in which anti-establishment parties did well and while politicians from colder shores continue to insist that any support will depend on the country's ability to stick with austerity measures.

The G8 summit last weekend called for Greece to remain in the eurozone, a goal that seems harder to achieve than ever as the Greeks are set to return to the polls a second time after a first inconclusive election in which anti-establishment parties did well and while politicians from colder shores continue to insist that any support will depend on the country's ability to stick with austerity measures. However, perhaps the European Parliament, representing the breadth and length of both Europe and the political landscape, has a role to play in bridging these seemingly insurmountable differences.

Despite much rhetoric, far more binds EU countries than divides them. Although there are disagreements about the method to pursue, both Alex Tsipras, head of the left-wing Syriza party that polls suggest could to do well in the elections on 17 June, and German Chancellor Angela Merkel, agree on the benefits of EU and eurozone membership.

That is no surprise, as membership of the two confers considerable advantages, which is why so far no single government has proposed leaving either the eurozone or the EU. For one thing, being part of the EU means being part of the world's largest internal market, which offers undeniable benefits when competing with outside firms on a global scale. Being part of the eurozone provides protection from currency market fluctuations, while stronger economies arguably benefit from a slightly weaker currency than would otherwise be the case - making it easier to export. Even weaker economies that might have benefited from devaluing their currency still prefer to give that up in favour of being in the eurozone.

Much of the debate on how to get Europe out of its economic slump has so far been pitched as a contest between partisans of austerity or stimulus. Recent election results, not just in Greece, but also in France, Germany, the UK and Italy have all been interpreted as pointing in the direction of growth-oriented policies. However, is the dichotomy between competing camps that clear? Policy makers worldwide and commentators from across the political spectrum emphasise growth and jobs as well as budgetary and fiscal discipline.

The European Parliament, directly elected and representing political opinion from across the continent, has not viewed the crisis as presenting a choice between two mutually exclusive options and has provided a forum for exploring creative solutions. Although most MEPs recognise the need for austerity to avoid passing on today's problems to tomorrow's generation, they have also always emphasised the importance of boosting growth. There is for instance the proposal for a financial transaction tax. This would involve a minimum rate for shares, bonds and derivatives. Not only should it help to discourage reckless speculation, but according to some estimates it could boost EU growth by 0.25% or about €57 billion if implemented at EU level. MEPs will debate the proposal on Wednesday. Another idea commanding strong support in Parliament is the idea of bonds issued at a European level, known as euro bonds or stability bonds. The European Central Bank would then be able to raise money to help troubled EU countries, which can only borrow independently at a much higher cost. Some countries fear that this could mean they would then have to pay higher interest. The idea of euro bonds is increasingly gaining support with new French president François Hollande announcing at the weekend that he would submit a proposal to the EU summit on Wednesday.

Of course, the Parliament represents many countries and many political groups, so it is no surprise that not all MEPs support these ideas in equal measure. But what they all agree on is that the scale of the problems facing Europe requires solutions on a European scale. As European Parliament president Martin Schulz told the Greek parliament in February: "We are all in the same boat. Only together can be ride out the current storm. After all, Europe is our shared future."

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