Pomp, ceremonies and no EU action

The euro debt crisis lingers on as European heads of state fail the leadership test whenever they are called to come up with a viable solution for this crisis that threatens the very existence of the EU. Attention is being focused on the inability of Greece to reverse the effects of decades of profligate practices that have burdened the country with a mountain of debt that clearly cannot be demolished even partially in just a few years.

Rather than pomp and ceremonies EU politicians must adopt the slogan Leadership, Leadership, Leadership!- John Cassar White

But the euro crisis has deeper roots. The Greeks seem to have retained their pride and are not prepared to adopt a “beggars cannot be choosers” attitude. Evangelos Venizelos, the Greek Finance Minister, issued a stinging rebuke of international critics in which he accused them of being complicit in Greece’s problems.

“We should not be the scapegoat or the easy excuse that will be used by European and international institutions in order to hide their own lack of competence to manage the crisis,” Mr Venizelos is quoted as saying.

Every meeting of EU heads of state and finance ministers is characterised by pomp and ceremonies. But little effective action is ever taken to bring this crisis to an end. European leaders are more interested in issuing statements aimed at soothing the nerves of the financial markets and the anger of voters than proposing viable solutions to ensure that European economies can once again concentrate on growth.

It is obvious to most economic observers not bound by political obligations that imposing more austerity on Greece, and now even Italy, will not resolve the current euro debt crisis. The financial governance framework of the eurozone is fundamentally flawed and it needs to be re-engineered completely. Basically there are two options both of which have the potential of threatening the very existence of the euro and indeed of the EU.

One option is based on more political integration that will mean that fiscal decisions will increasingly be taken by politicians in Brussels rather than by member states. While some countries like Italy would not mind this so much because their own government have proven so inept in managing their own finances, others like Germany, the Netherlands, Finland and Austria resent this option.

The idea floated by European Commission president Manuel Barroso that full fiscal governance integration can be achieved gradually by first introducing the concept of euro bonds lacks support from eurozone heavyweights like Germany. The emergence of euro bonds guaranteed by all eurozone states will mean that German taxpayers will have to pay higher interest rates for their government’s borrowing. At the same time they will guarantee the debt of profligate governments in the eurozone, like those of Greece and Italy, who see little virtue in being prudent in their borrowing. This is political dynamite as Angela Merkel has discovered this year when it lost ground in all six regional elections in Germany.

The other option could be the disbanding of the eurozone as a result of irreconcilable proposals on how to move ahead with more political union. Many fear that the end of the eurozone will deal a deadly blow to the whole concept of the European Union. Europe is already losing its importance as an economic power house as the centre of gravity of global economic activity moves to the Far East where countries like China and India are experiencing impressive economic growth. A politically and economically fragmented European Union can be not match to the competitive might of the new economic tigers in the Far East.

We are still in time to avoid these two options – at least in the short-term. But we need to start by writing off a good part of the Greek debt and face the consequences that this move will impose on Greek bond holders especially banks. We then need to concentrate more on economic growth rather than austerity to give a chance to weak economies in the eurozone to create jobs and wealth. The restructuring of the governance framework of the eurozone countries can be started simultaneously to ensure that in a few years time more sensible rules are written.

Realistically Malta can only be an attentive spectator in this process. But the time that these reforms will take can be used wisely by our leaders to upgrade our own economy that shows signs of distress in some areas. Rather than pomp and ceremonies EU politicians must adopt the slogan “Leadership, Leadership, Leadership!”

jcassarwhite@yahoo.com