EU Crisis; Mission (im)Possible?

The World

Oli Ren holding glasses


Despite political/ policy activity within the Member State (MS) and Europe, currently the EU crisis seems to resemble a bad repeat of the past.  Similar to the latest mission impossible movie it appears that there is “no plan, no backup, no choice”.  The lack of fresh ideas from Brussels, governments and grassroots’ organizations is ultimately the issue that will only prolong the crisis and cause shrinking of the EU GDP in 2012. 

Markets appear calmer but Italy is borrowing at particular high spreads, Greece is still on loan-mode, forever pushing changes that never come.  Spreads in Central Eastern Europe are rising with Hungary likely to be the next Greece.  Mr Sarkozy is concerned over possible downgrade of France’s 3A credit rating, and the PSI for Greece is still under negotiation.  Even Sweden and Norway appear concerned, as German output keeps dropping with reduced demand across Europe (especially the South) and East Asia.  Finally, the ECB is maintaining an anti-inflation target; good for the German economy but not for everyone else as Mr Monti pointed out earlier this week.

No plan.  All this is more or less a repeat of the situation the EU has been in the past 2 years.  The agreement/ accord signed a month ago, which the UK vetoed, is more like a recurrence of the 1991 Maastricht Treaty.  Though applying stricter measures on implementation on deficit/ budget rules makes sense in the long term, it will not help MS that are facing a crisis and unlikely to stabilize their budgets over the next 2-5 years.  This re-run of older EU episodes comes as a result of a lack of ideas from all the actors involved in the process.  On the national level governments and interest groups (unions, business associations, etc) have been particularly unimaginative.  The line of argumentation is divided between cuts and no cuts.  Brussels’ plan is staying surprisingly quiet, for now this strategy seems fine but eventually when the dust settles the Commission and a series of other high-rolling bodies/ organization will be held accountable for their inactivity.  

No back up. What is perhaps most frustrating is that though it is understood that further integration across the board is necessary in order to deal with the crisis there is no inspiring leadership or strategy on how to drive forward the concept.  At the risk of sounding cliché they don’t make them like they used to; Sarkozy, Barroso and Merkel appear cheap imitations of Mitterrand, d’Estaing, Kohl.  Moreover there is no external back up: PIGS cannot borrow internally or on their own, the US has officially stated that it cannot intervene if things turn sour, China has kept its distance from backing up a Euro-fund.  Interest groups keep speculating or defending the status quo, asking for more of the same.  This situation might be exciting for policy analysts but it is actually pretty scary.  

No choice.  The relatively good news is that the EU and its MS do not have a choice but to deal with this situation.  If they do not then the European crisis will take a very nasty turn, potentially turning global. The European economy will slump and take a turn back in time to the mid-80s.  If you are too young to remember it just ask someone older, in a nutshell it will make current 10%-20% unemployment and 20%-40% youth unemployment rates look like a treat.

Mission (im-) possible.  Dealing with the issues at hand is complex but not impossible, controlling budgets is a start but further action is required.  If elected representatives and policy makers cannot provide sufficient answers then it is up to the public and representative interest groups to take a deep breath and start providing realistic and more importantly innovative proposals.  The Lisbon Agenda failed to come true because of in-activity and endless stalling; in classic EU tradition the 2020 goals seem to be next.  It would be best for everyone to start being creative and avoid yet another repeat of the past, after all no one really enjoys re-runs.

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