Government policy must be balanced to obtain economic recovery
The risk is that Europe gets locked into a false choice between growth and deficit reduction. The truth is that we need the right combination of both – action now to get Europe's economies growing and creating jobs, tough medium-term action to get public finances back into shape and a long-term strategy for increasing the continent's productivity and skills base.
It is true that Ed Balls and Peter Mandelson disagreed on the case for British membership of the single currency. They agree, however, that the single currency needs to survive and succeed – and are worried that Europe has so far identified only half the solution. There is a real danger that binding countries into ever larger cuts and tax rises to meet the new structural deficit and debt targets will become self-defeating, economically and politically.
A collective strategy that is choking off demand is compounding Europe's problems – just as it has done in Britain, where our economic recovery has stalled. Investors are now worrying that the policy mix has become unbalanced, to the detriment of economic recovery. We need a new strategy that permits a more sustainable approach to debt reduction through growth and long-term fiscal responsibility.
Growth needs the demand that comes with reviving confidence. Many European companies and consumers are struggling under a heavy burden of debt and deleveraging. But many also lack the confidence to spend and invest, because they see an uncertain future.
Britain should be influencing the debate on the future of Europe, not locked out of the room where the big decisions will inevitably be taken on issues that directly affect our economic interests. .......