Bratislava EU talkfest will ignore pain in Club Med economies

Athanasios Gioumpasis | Getty Images

Kefallonia, Greece.

With more than 122 million people - 24.1 percent of the EU population - at risk of poverty and social exclusion, and more than 20 million of unemployed, it was just a matter of time before this social and political tragedy overwhelmed the governments of the world's second-largest economic system.

Mercifully, that time is nigh.

Greece and ungovernable Spain, struggling with jobless rates of 23.5 percent and 20 percent, respectively, are saying enough is enough.

Beppe Grillo, the standup comedian and the founder of Italy's opposition Five Star Movement (M5S) is going from strength to strength, screaming "basta" and "onesta" (honesty), while pilloryingGermany's misguided austerity diktat and joining the Northern League's (Lega Nord) call to exit the EU. M5S is now polling at 30.6 percent, slightly ahead of the governing Democratic Party's 29.8 percent.

With an astonishing appeal to both left- and right-wing voters, Grillini could derail Italy's next month referendum on constitutional changes. That would bring M5S a step closer to power, after they won 19 of the 20 mayoral elections last June, including Rome and Turin.

France is facing similar challenges. The governing Socialists are in deep trouble ahead of next May's elections for their alleged submission to Germany, and their inability to stimulate faster growth and employment creation.

Club Med wants growth and jobs

So, here is a plot. Taking a cue from the Visegrad Group's (Poland, Hungary, Czech Republic and Slovakia) repeated condemnations of the EU's immigration and security policies, the leaders of France, Italy and Greece were joined on September 9 by Spain, Portugal, Cyprus and Malta for an EUMED meeting in Athens, Greece, to prepare the EU summit in Bratislava, Slovakia, on September 16.

The EUMED countries have issued the Athens Declaration, focusing on policies to promote growth and employment. Problems of immigration, security and European unity are also mentioned, but the accent is clearly on stimulating demand and output to relieve growing socio-political instabilities in this region.

Setting aside the EU's very real and permanent north-south and east-west centrifugal tensions, the question is whether there are any chances that the appeal of these seven countries will be heeded at the time when the EU's future is a central theme of the Bratislava meeting next Friday.

I have serious doubts about that.

Germany and its likeminded northern followers will fight tooth and nail to squash this southern dig. But Germany will lose. Investors, therefore, should base their strategies on the prospect that the EUMED will ignore German austerity obsessions and its stubborn will to command. Led by France and Italy, the EUMED will be equally determined to do all they can to relieve human suffering and to stave off brewing social unrests.

So, let's start with France.

The hard-pressed French Socialist government has already announced that there will be income tax cuts and maybe also lower non-wage labor costs. Taken along with criticism of the German-dictated fiscal "stability pact," this implies that Paris will leave the budget compliance (or an outright scrapping of the "stability pact") to the next government, which will take the helm in May 2017. The view that this is a desperate vote-grabbing is correct, but it is also partisan and simplistic. The same policy intent is put forward by the whole spectrum of right-wing and extreme-left parties, with an ominously accusing finger pointed at Germany.