In the late 1960s we had the Prague Spring which was an attempt by the people of what was then Czechoslovakia to assert their right to a democratic system of government. It was brutally crushed by the then Soviet Union and the satellite regimes in Eastern Europe. Some years ago, political analysts spoke about the Arab Spring as peoples in countries such as Libya, Tunisia, Egypt and Syria also sought to have a democratic system of government. With the exception of Tunisia, these attempt have also failed.

Thus one can understand that there would be cynicism if one were to speak about a ‘European Spring’, since the previous so-called ‘springs’ have come to a miserable end. The European Spring is not about asserting a people’s right to democracy but about the performance and prospects of the European economy as emerging from the spring forecast published by the European Commission this week. Will the 2015 spring lead to ‘a glorious summer’ (apologies to the Bard)?

Signing off this report, Marco Buti, the director general for economic and financial affairs at the Commission, is fairly optimistic about the future. The pick- up registered at the end of last year has maintained its momentum at the beginning of this year.

This has been attributed to three factors. First there is a higher level of consumer demand generated by lower interest rates and lower energy bills (not only in Malta). This has meant greater purchasing power and more consumer confidence leading to higher spending. However, investment demand still has to pick up and unless this happens, economic growth will come to a standstill once more.

The second factor is that the fiscal policy adopted by various governments has become more supported of economic growth, rather than fiscal consolidation, or even generating a fiscal surplus at all costs.

However, if economic growth does not lead to higher tax revenues, there will not be the required resources for governments to carry on with this approach.

This stance adopted by EU governments has been supported by the quantitative easing measures adopted by the European Central Bank. This has led to a lower interest rate, thereby encouraging further spending. On the other hand, we would need to factor in the potential effects on consumption of an increase in the interest rate in the future. Will it bring economic growth to a halt?

Investment demand still has to pick and unless this happens, economic growth will come a standstill once more

The third factor is the weakening of the euro against the dollar and the sterling. This has boosted exports of goods and services from countries in the eurozone, as a result of increased competitiveness. The point to consider here is what should the long-term rate of the euro against the dollar be? Was it overvalued before or is it undervalued now? Thus although these factors have contributed to economic growth, how long will their effect last? Will they lead to a glorious summer?

A look at individual countries indicates a number of limiting factors. For example, Bulgaria appears to have constraints in investment growth. Estonia is reported to have external constraints. Austria is limited by uncertainties. The growth in France, the UK, Slovakia, Ireland, Czech Republic and Poland is fuelled by domestic demand. Italy can only expect a gradual recovery at best. In Finland, growth is failing to accelerate. In Hungary growth has decelerated.

More positive comments are made about other countries, where growth is seen to be sustainable in the future. Malta is in this last group of countries.

Buti does highlight that for growth to become sustainable there need to be more permanent drivers. The first is investment. Although a fiscal policy aimed at driving consumer demand is positive, its effect is very short term unless it is supported by investment. A fiscal policy aimed at boosting investment may take longer to impact the economy positively, but its effects are likely to be more permanent.

The second driver is structural reforms. These may be unpopular to implement; but have long term positive effects on economic growth. One just needs to look at what is happening in Italy. Italian Prime Minister Matteo Renzi is determined to modernise the country to make a quantum leap forward. There is big internal opposition, which is not realising that its past approach is one of the main reasons why Italy’s economy has suffered more than most others.

The third factor is fiscal responsibility. Past history has shown us that profligacy has not worked and brought about a crisis in several countries. Runaway public sector expenditure may buy some time, but it only means making tomorrow’s economic problems more severe.

I believe that the concern that the positive news of the EU spring forecast may be short-lived, does have a basis. On the other hand, if EU governments adopt real (not artificial) growth inducing policies, the good news will extend to the medium term and longer term.