23 December 2012

Jean-Dominique Guiliani: Europe - Towards recovery?

No political entity in the world has changed its rules of governance and finance as much as the European Union has. If it continues its efforts, they may form the true springboard for Europe's recovery.

The European Union has overcome the first real crisis since its creation, which threatened both its existence and that of the euro. 

To rise to the challenge, Europeans mobilised financial power equivalent to what today would be three Marshall Plans ($3,000 billion). For the last four years, direct aid to States in difficulty (€400 billion), credit facilities on the part of the European Central Bank (€1,000 billion) and its repurchase of public debts (€200 billion), the rescue of the financial sector (€1,616 billion) and national recovery plan, have represented a considerable firewall.
Economic governance of the Union has been transformed in depth with what might be called a European Monetary Fund, the European Stability Mechanism, Budgetary Union and Banking Union which will be achieved in 2013 together with the coordination of its economic policies. It continued integration with the European Patent and the financial transaction tax.

In spite of the difficulties Greece, Portugal and Ireland, beneficiaries of the Union and FMI's support, followed by Spain, Italy and Slovenia, accepted draconian budgetary cuts, reformed their labour markets, consolidated their public accounts and then ran the risk of temporary recession and increased unemployment. Recent moves by France, which still have to be confirmed, might go in the same direction since it is the only one that might revive sustainable growth, which it would be vain to expect of the others. The Europeans have accepted major sacrifices which were democratically decided, ratified by their parliaments and sometimes confirmed by general elections.

No political entity in the world has changed its rules of governance and finance as much as the European Union has. These efforts, however difficult they might have been, must be continued. Because the crisis seems to be neither temporary nor does it resemble anything we have ever known. It was born of signification mutation and other major changes are to be expected. Technological progress will gather increasing speed. Changes will now be constant and will demand a great deal of populations, overturn societies, surprise political leaders and unsettle experts.

These changes concern all continents. The USA is facing real challenges with a colossal debt and growth which has been supported for too long by spending. Japan is struggling to emerge from a long period of stagnation, China and the emerging countries now face the challlenge of development in their societies, which raises the living standards of their citizens and obviously sets the question of the rule of law and freedom. A world with no leadership will replace a multipolar world.

In this context, Europe is reshaping its economic muscles and is in a good position to influence the international arena where much is expected of it. It will have to work more outside of its borders in order to defend and promote its interests. Concerned by everything that is ongoing in the world, it still has to acquire a stronger voice as a political entitiy which counts - which is not the case today. But that is another story which the Near East, Iran and Africa will soon call to its attention...

With all of the reforms that have been implemented over the last four year, Europe seems, in many respects, to be well positioned. If it continues its efforts, they may form the true springboard for Europe's recovery.

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© JD Giuliani