Leading Article: Don't be fooled: Europe is not embracing Keynes

THERE HAS been some rather overheated wishful thinking in some parts of the political spectrum since the German elections last month, to the effect that the whole continent of Europe is tilting to a new left- wing, Keynesian economic policy.

Certainly, the German elections were important, but we should not extrapolate a big shift in economic policy from that. It was also significant that Oskar Lafontaine, the German finance minister, has asserted himself against Gerhard Schroder, the new chancellor. Despite Mr Lafontaine's left-wing reputation, however, the tussle is essentially personal rather than ideological.

Some of Tony Blair's British critics on the left mistranslate the different cadences of continental social democracy as support for their case, whatever it is. They see Lafontaine versus Schroder as Brown versus Blair, and as socialism versus centrism. This is to misunderstand both the German chancellor and the British one.

There is a lively debate over the way in which the European Central Bank will operate - which is rather alarming, just six weeks from the launch of the single European currency - but it does not divide leftists from centrists. The division is more between politicians and bankers.

Gordon Brown is a strong believer in openness, wanting the European Bank to publish the minutes of its discussions and explain itself to the people of Europe through their elected governments. He has also expressed sensible doubts about the bank's inflation target, warning of the danger that erring on the side of caution within a 0-2 per cent range will produce falling prices and unemployment.

But this is a far cry from the demand that the bank should also be set targets for growth and employment: it cannot hit two (or three) targets at once, and in any case, low inflation is a precondition of the other two.

The harsh truth is that there is no substantial alternative economic policy which could be pursued, rather a technical debate in which different people will line up on different sides at different times. Those who hanker after a return to a pre-Thatcherite age of economic innocence are bound to face disappointment. Mr Blair's encouragement of robust action by employers against unofficial strike action on the time-tied Jubilee line was highly symbolic.

Many of Keynes's teachings are now part of the mainstream. Even Japan is resorting to printing money - or coupons anyway - to try to stimulate demand. But the idea that European economies are in such a state that unemployment can only be tackled by more public spending and borrowing is premature, to say the least.

The arguments over the European Central Bank are going to go on, but let no one be fooled into thinking that this is a form of socialism reasserting itself.