Bonding Over Eurobonds?

Well, that was anticlimatic.

Last night’s “informal dinner” for EU leaders was touted as a “no taboos” debate on a growth pact. Eurobonds! Infrastructure spending! Public investment! Cross-border job placement! Or, if you will, every idea trotted out over the past 18 months. Sure, various officials have shot all of these down at one time or another, but this time, with growth so critical, all bets were off!

Or were they? At the end of the evening, leaders made the epic announcement that they’d agreed to ... wait for it ... eventually reach some sort of agreement on common growth policy.

They claim that’ll happen at a June summit, but I’m not holding my breath for any grand changes. Certain leaders have core philosophical differences over what, exactly, “growth policy” means. Angela Merkel, the ever-beleaguered, ever-resolved German Chancellor, believes (quite rightly, in my view) the best policies are those that make economies more productive and competitive, enabling them to grow more in the longer term. Others, like new French President FranÇois Hollande, European Commission Chief Jose Manuel Barroso and Italian Prime Minister Mario Monti, think demand-side stimulus—particularly, Eurobonds that fund infrastructure projects—are the answer. But Merkel’s not keen to bless policies that would add to sovereign debt loads, force Germany to underwrite weaker nations, and not fix the union’s underlying competitiveness problems. Nor is the German electorate, to whom she must answer in 2013.

As long as that ideological chasm remains, earthshattering changes likely aren’t in the offing. But that’s probably ok—simple time is also an excellent prescription for Europe. Time, that is, for all the supply-side-ish policies already enacted in the periphery to start working as intended, so these economies can compete globally and resume growing.