Will EU summit offer new hope for Greece?

BRUSSELS, Belgium — Elpizo. It means “hope” in Greek, and lately there's been precious little of it.

Now, after a five-year recession that has seen the Greek economy shrink by 18 percent and jobless lines swell to include one-fifth of the workforce, the rest of Europe seems to be coming round to the idea that Greece needs more than just tough love.

“We want to seize this moment to help get the Greek economy moving again,” said Jose Manuel Barroso, president of the European Commission ahead of the EU's latest summit that started on Thursday. “This is the right moment to step up our work on growth for Greece.”

Even Angela Merkel, the German chancellor reviled by many Greeks as the chief architect of the austerity programs that have ushered in dramatic cuts to wages, pensions and public jobs seems to agree that the time has come to sweeten the pill.

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“It is primarily about growth possibilities for Greece, but for many other countries that are performing below their potential,” Merkel told reporters as she arrived for the two-day meeting of EU leaders.

In contrast with the slash-and-burn policies that have dominated the EU's almost 20 emergency summits since the debt crisis began, the draft statement due to be adopted at this week's gathering is packed with proposals designed to rekindle the euro zone's stagnant economy.

Two factors are underlying the switch.

On the economic side, there is the realization that no amount of tax hikes, spending cuts or international bailouts are going to provide a long-term answer to the debt woes of countries like Greece and Portugal, unless their economies eventually start to grow.

Politically, there is growing concern that without some light at the end of the economic tunnel, the discontent that has provoked riots in Athens, strikes in Lisbon and Madrid, and growing divisions between the EU's rich and poor countries could undermine European unity or even threaten the continent's democratic foundations as anger fuels support for extremist parties.

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“We need to give Europe hope,” said Hans Martens, chief executive of the European Policy Center, a Brussels think-tank. “Why is there no carrot for Greece? Why are we just whipping them?”

So what can Greece expect? A deal is pretty much wrapped up on a second bailout from the EU and International Monetary Fund that will transfer 130 billion euros to Greece. That will ease the immediate threat of bankruptcy, but it won’t do much to promote growth. The bailout money must be used to cut the public debt, not to invest in jobs.

With no budget slack in the debt-stricken southern countries, and no stomach in Germany or other better-off northerners for any Marshall Plan-style investment plan to help out the neighbours, options for sparking growth are limited.

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The draft summit statement calls for opening up trade within the EU in areas like energy and electronic commerce; investments in education, research and green energy; liberalizing labor markets and tax breaks for job-creating companies.

At best, such measures might firm up growth in the years ahead, but they do nothing to deal with the immediate problem of shrinking economies and record unemployment in Greece, Portugal, and Spain.

One option touted by the EU's head office is to mobilize the roughly 80 billion euros in funding already earmarked for the Union's poorest regions to support the development of new transport, energy or communications networks.

This week's summit is also expected to a launch a plan for EU-wide “project bonds” to raise more money for such infrastructure programs.

About 15 billion of that should go to Greece, and could provide short-term jobs and improve longer-term competitiveness.

The problem is that European officials are worried about the capacity of Greek authorities to put the money to good use, while the Greeks are wary of letting outsiders come into run another part of their economy.

Increasingly however, it seems like Greece will have to swallow such indignities. The Greeks are just appealing for it to be handled with more sensitivity from their northern partners, and with a firm commitment of support that will end fears that the country will be forced from the euro zone.

“In order to be effective, we need to demonstrate respect toward Greece and the Greek people. It has to be done in a way that is not insulting,” said Anni Podimata, a Greek Socialist member of the European Parliament. “We cannot ask people to shoulder the burden, if doubts are hanging over the future … we need investment and clear incentives.”