Geert Vanden Wijngaert, Associated Press
PARIS — While Friday's European summit received a measure of approval from markets for committing to belt-tightening, some businesspeople are worried the accord might further choke growth.
They want to remind their leaders: It doesn't matter if you fix the debt crisis, if you break the economy to do it.
And a deal on debt doesn't address the regulations and bureaucracy that can hold back businesses and entrepreneurs.
While European leaders have repeatedly been criticized for acting too slowly and haltingly to calm financial markets, there is some praise for Friday's deal, which commits governments to balanced-budget laws and tougher scrutiny of their spending from European Union officials. The aim is to convince bond markets that Italy and Spain will be able to pay their debts, so they can borrow affordably and avoid financial collapse. High borrowing costs forced Greece, Ireland and Portugal to take bailouts from other eurozone countries, but Italy and Spain are regarded as too large to bail out — and a default would mean another financial crisis.
Wilbur Ross, who has about $1 billion invested in Europe, praised the deal and said he was surprised that the countries moved this far as quickly as they did.
"Look back a few months ago," said Ross, the chairman and CEO of a private equity firm, WL Ross & Co. "Nobody would have thought there would be any real centralization of fiscal control over individual European countries, yet that's the direction they're moving in."
While many praised the recent agreement among most EU members to pursue closer fiscal ties, some expressed concern that the accord seemed to speak only to the concerns of markets. What about the "real economy," they ask.
Thierry Jeantet, director-general of Euresa, a network of European insurance companies, called it only "a partial agreement" that fails to address "the fundamentals."
"Europe doesn't have any more industrial dynamism," he said. "Europe needs to relaunch its industries, to relaunch its small- and medium-sized businesses."
He advocates an investment fund — not just a rescue fund like Europe's €440 billion fund to support governments — that would pour money into public works and innovation, including encouraging new businesses and investing in technology.
Marina Niforos, managing director of the American Chamber of Commerce in France, echoes the need for more investment.
While individual countries are working to promote innovation — Italy's new budget has some growth-stimulating measures and French President Nicolas Sarkozy has called for more support for small businesses — Niforos said Europe needs a more coordinated effort.
"Austerity that is not coupled on the other side with some kind of a program for job-creation is worrisome," she said. "You need the calm financial markets, you need to restore credibility, but, at the same time, it can sink us into a recession, unless we do have a thought-out plan on the other side to counteract that."
The European Central Bank sharply reduced its projection for 2012 growth on Thursday, to a bare 0.3 percent, down from 1.3 percent only three months ago. Many economists think Europe could be headed into a recession, as fears about the future weigh on business decisions and as growth in emerging economies slows.
Slowing global demand could hurt growth in Europe's export-oriented industrial economy, and the turmoil on financial markets could spill over into the wider economy. Efforts to make banks keep more capital reserves against possible losses from the crisis could cause the institutions to cut back on lending as well — which means it's harder to start or expand a business.