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European leaders are leaving the hard work on jobs and incomes to ECB. This must change

Flagpoles outside the European Commission building as European Union (EU) leaders met in Brussels, Belgium on October 21, 2016.
Jasper Juinen | Bloomberg | Getty Images
Flagpoles outside the European Commission building as European Union (EU) leaders met in Brussels, Belgium on October 21, 2016.

Investors and 21 million of jobless Europeans will find the conclusions of the last week's European Union (EU) summit a depressing reading.

Not a word about measures to raise the EU's "sizzling" 0.4 percent economic growth in the first half of this year to create jobs, protect more than 120 million people from poverty and social exclusion and give a meaningful future to 4.2 million of young people looking for work.

It seems that these existential issues -- or what U.S. politicians call "the people's business" when they run for office every four years – were not considered important enough in the best ancient Roman tradition that the bosses don't concern themselves with trifles (de minimis non curat praetor).

This regrettable indifference should give pause for thought to anybody putting the money into the EU, because the union's economic policies must be closely coordinated at the highest policy levels. No member country – especially those in the euro area – can conduct independent economic policies. The degree of integration is such that the monetary policy was given to the European Central Bank (ECB), trade policies are delegated to the EU Commission, while fiscal and structural policies are subject to binding peer reviews arbitrated at summit meetings.

Clearly, "the people's business" of jobs and incomes is such a big issue that it should be front and center at all EU summits. Instead of that, the EU leaders were strutting around last week with dire warnings about the U.K.'s "hard-Brexit" and apocalyptic nonsense they hope to dump on Washington's "liberal interventionists" (aka, neocons).

Is the change in the air?

They are doing the same thing with the ECB. The heavy lifting is left to Mario Draghi amid incessant catcalls from Germany and "head-for-the-hills" punters criticizing the euro area central bankers for providing the only life support to the region's struggling economies.

Is this going to change? Are we going to see anytime soon a new generation of European leaders who will put "the people's business" of jobs, incomes, healthcare, education and the quality of life at the top of their agenda – and do something about it?

That's a tough call. But it is possible that the bad things we see now could bring forward more caring and competent people with a true dedication to public service.

[Here is a warning, though. Most of the people who listen, and deliver, to their voters are derisively called "populists" by politicians who failed their mission and, worse, by the media who ignore, or intentionally pervert, the etymology of the word itself.]

To answer the question posed, the outlook for the EU's "people's business" will depend on socio-political changes currently under way in a number of countries, such as Spain, Italy, France and Germany.

Spain's political drama after two inconclusive elections ended today (October 23) as the Socialist Party (PSOE) agreed to abstain from toppling the right-wing minority Partido Popular (PP) in parliamentary voting. It is not clear how long will the Socialists maintain this precarious political situation. But it is possible that this remarkable concession was made in order to focus attention on economy and social welfare in a country crushed by a 19.5 percent jobless rate and an estimated one-fifth of its population living below the poverty line.

Will it start with Italy?

Italy is facing similar problems. The country's referendum on constitutional issues on December 4, 2016 is seen as a sanction vote on failed economic policies. The governing Socialists are squeezed from left and right, with ominous anti-German overtones. Provinces and cities are taking things in their own hands. Braving the sanctions, an 18-man delegation from Emilia-Romagna, Liguria, Lombardy, Tuscany and Veneto just visited Crimea where they are producing, among other things, the cheese (parmigiano-reggiano) and wines from the glorious Sangiovese ("the blood of Jove") grapes.

And the feisty Virginia Raggi, the newly elected mayor of Rome, told the government that she won't compete for 2024 Olympics; she wants to concentrate instead on pressing issues such as garbage collection, public services and the city's unmanageable debt. Not surprisingly, Romans seem to be taking to this "populist."

France is living a chaos of political mutiny in the ranks of governing Socialists, where 86 percent of the voters don't want the serving president to run for reelection next May. The veteran politician and the right-wing frontrunner Alain Juppé is widely seen as a safe pair of hands to hold off the extreme-right Front National (FN), which went from zero to 30 percent (and counting?) of national vote on issues of unbridled immigration, high unemployment, 8.5 million people living in poverty and deteriorating public services. Whoever wins cannot ignore that one-third of the French electorate, especially since the FN leader Marine Le Pen (denounced as yet another "populist") is expected by all opinion polls to reach the runoff stage in the forthcoming presidential elections.

Germany's Angela Merkel is no "populist," but she is a hotly contested leader within her own governing coalition. German media see her winning in the next September elections for lack of better candidates. The media are probably underestimating the ability of Socialists, the Greens and the Left Party to come together. At the moment, these three parties have a clear majority of 320 seats in the lower chamber of the German Parliament. Where would all that leave Merkel's estranged Bavarian sister party CSU (Christian Social Union) is also an open question.

In an eerie parallel to what is happening in Italy, regional state elections, and the behavior of local authorities and German businesses, are showing that Merkel's leadership is increasingly questioned, in spite of an apparently fully-employed economy and a record-high 5.4 trillion (sic) euros in private portfolio investments.

Investment thoughts

Europeans are getting restless about their leaders' inability to address problems of high unemployment, poverty, healthcare, education and deteriorating public services. The leaders are defending themselves by blaming "mistakes" (whatever that is) in the European integration, and "the people's alienation from a united Europe." The media are swallowing that whole; they are even going one up by relaying Berlin-inspired financial market attacks on allegedly bad ECB policies.

It seems that people are beginning to see through all this. But how true that is will be tested during the ongoing election process in Spain, Italy, France and Germany. The old French political adage "on prend les mêmes et on recommence" (we reelect the same ones and start over again) may yet prove its longevity, although odds look better than even that the EU's leadership malpractice could be roundly sanctioned.

Meanwhile, rest assured that the ECB is one of Europe's rare bright spots. Credit numbers are showing that the ECB policy is working – slowly – to support household consumption, residential investments and business capital outlays. All the credit demand statistics are significantly above their year-earlier levels. The ECB has also helped the euro area's considerable improvements in budget deficits and public debt.

One may only regret that failed politicians could take all that as their own achievements.

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