Will Germany Swallow Inflation to Save the EU?
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The Fiscal Times
May 21, 2012

This weekend’s G-8 summit at Camp David, the U.S. president’s retreat, marks a big step for Europe in several different ways. After a couple of weeks of waffling, German Chancellor Angela Merkel now appears ready to deal on a new European economic strategy -- something beyond the one she has shaped and enforced over the past two years.

Related to this, the EU is now committed to developing a combination of policies that balance fiscal responsibility and the need to stimulate growth and job-creation. The communiqué after the gathering called this “imperative,” marking a dramatic policy shift.

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Finally, it looks as though European leaders have taken a step back from the hot-and-heavy insults and brinksmanship that were gaining momentum—notably between Athens and Berlin—before the G–8 met.

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All in, the Camp David gathering counts as an important advance. What is more, it gives President Obama a credible voice as an honest broker in his dealings with both Merkel and François Hollande, France’s new Socialist president. Obama met with both separately in the course of the weekend.

There was little in the way of specific measures disclosed at the G–8 session, but there never is on these occasions. We can look forward to policy details emerging quickly, however. There is a dinner of EU leaders in Brussels this week, and a full-fledged summit scheduled for June. It is likely, after this weekend, that we will see more than a new policy in outline by the June summit: We will see the guts of it.

Questions arose this weekend. The most important: whether stimulus or austerity will get top priority in the EU’s new policy mix. At Camp David, Obama talked of “an emerging consensus” on jobs and growth. Hollande said the same thing. But it is better not to count this chicken before it is hatched.

A correspondent, editor and critic for more than 30 years, mostly for the International Herald Tribune and The New Yorker, Patrick Smith has also lectured in journalism and media studies. He is the author of five books.