EU chief, Monti caution on path to growth

(BRUSSELS) - EU president Herman Van Rompuy said Thursday that there was no simple answer to getting the eurozone back to growth, with the prospect of more stimulus spending unrealistic.

Van Rompuy, who said he is planning an extra summit of European Union leaders to tackle the conundrum, said there was "hardly any room for stimulus," labelling such calls "schizophrenic" and warning that austerity is a non-negotiable anchor.

"Fiscal consolidation is not an objective in itself -- it is a prerequisite for sustainable economic growth," Van Rompuy said, talking of "an informal leaders' dinner" ahead of the next summit planned for June 28-29.

With the eurozone likely already in recession as two years of austerity measures bite, he said the economic reforms adopted to tackle the debt crisis will take time to impact on growth and jobs.

National leaders are under growing pressure to act, with voters restive as a series of austerity measures intended to stabilise strained public finances has also slashed growth and jobs.

French President Nicolas Sarkozy is fighting for his political life, with the frontrunner Socialist Francois Hollande ahead in polling before a run-off vote on May 6.

Hollande said he will press for growth measures to go alongside the eurozone's tighter spending controls.

German Chancellor Angela Merkel has acknowledged the calls by talking about growth measures that could be added to a pact for fiscal discipline, but she is unlikely to deviate far from a cocktail of structural reforms to labour and services markets demanded by European Central Bank chief Mario Draghi.

Dutch Prime Minister Mark Rutte's government has already fallen, as it battles to plug a 16-billion-euro gap in its budget this year -- while Spain has had to obtain extra time to meet commitments on cutting its deficit.

Italian Prime Minister Mario Monti insisted that stimulus spending would deliver only "illusory" results, warning a conference organised by employers federation Business Europe that Europe "needs to continue to avoid policies that would only in an ephemeral way give the impression" of growth.

Reiterating the Draghi agenda, Monti maintained that "old-style Keynesianism," or government spending to boost demand, must be avoided as "it would produce no good for Europe's economy, or for national economies for that matter."

Where he said the EU and its leaders could focus was on "cross-border infrastructure investment," a theme the European Commission has been pushing for the past year, focused on energy and digital connections.

Monti, whose popularity has slid back to the level at the time of his appointment according to the latest Italian polls, said "structural reforms per se will never deliver growth," suggesting an "inglorious" fate if there is zero flexibility.

But European Commission president Jose Manuel Barroso said Europe already had a strategy for growth, the problem lay in failed implementation.

"The core of the problem is competiveness... with the outside world," he told the conference's closing session.

"We have a strategy for growth -- 'Europe 2020'."

Barroso said it would be a "complete, dramatic mistake" to change horse halfway through, using the calls for cross-border, EU-level investment to underline his bid for a bigger EU budget.

Belgium's Socialist Prime Minister Elio Di Rupo said the task facing European leaders was to find ways to optimise "limited resources" and "find new instruments for growth."