26 January 2012

Jean-Dominique Giuliani: Europe, brighter skies ahead

It is far too early to speak of the end of the crisis in Europe, but the end of the tunnel is now in sight and we have entered a period of consolidation. We must not give up but continue working, and be prepared to put in more effort.

In the crisis the European Union has revealed a great number of its imperfections, starting with a confusion of declarations and an unbearable slowness in the decision making process. Surprised by the size of the challenge it faces it has also committed some errors that have been of concern to investors.

But we have to admit that now all of its institutions are working hard to overcome this mistrust.

The work undertaken by the European Central Bank has succeeded in bringing some calm and sense back to the markets. The European Council of Heads of State and Government have taken some brave decisions that are bringing major changes to euro zone governance. The European Parliament has provided this new governance with its initial legitimacy. The Commission has finally woken up. 

Of course a great deal remains to be done in establishing a solidarity mechanism that can rise to every one of the States' weaknesses and settle the outcome of the Greek debt long term. 

But it is now clear that the euro will not disappear and that it might emerge somewhat strengthened from the experience it has just been through. Proof of this is already there.

The time has now come for a necessary return to growth in Europe. The implies a real reduction in public spending, a sweet drug that is supposed to support the economy, but which suffocates it in fact.

If public funds had fostered employment and growth, the sharp rise in spending and debt of the last 15 years would have given us double figured growth and full employment!

We still have to convince those who are not used to counting. The citizens have already integrated this. They will accept a fair and skilfully led policy, which can be explained clearly and put into perspective, because Europeans will want to defend a European model of society that is the envy of the world. 

The European Council on 30th January should therefore be imaginative and reorient the Europe's main pooled resources towards employment, innovation and production.

Europe is the continent which has reformed its governance the most during the crisis. The new Budgetary Pact Treaty confirms that there has been significant development, the consequences of which have yet to be properly gauged. In the long term it seems that Europe will be even more integrated, beyond the point that was previously imagined.

It is far too early to speak of the end of the crisis in Europe, but the end of the tunnel is now in sight and we have entered a period of consolidation. We must not give up and continue working, and be prepared to put in more effort.

This is because the crisis we are experiencing is worldwide. It started in 2007 and will not come to an end in 2012. It is challenging Europe as it will probably threaten other countries and the emerging countries in the future. 

It is everyone's priority to move towards the stabilisation of a financial and monetary system that has been disrupted by new players and economic interdependency.

It is therefore urgent to complete the first task we face - that means bringing our financial situation into order; we have to free Europe's growth potential and have hope again - something that we can easily do.

Original article

© JD Giuliani