Asa cum l-am gasit ....
Brussels, 4 August 2010
Can the Euro survive?
President of the SME UNION of the EPP
at the EDS-Summer University, Zilina, Slovenia
18th -25th July 2010
Euro zone problems are deep rooted, structural and self-inflicted
Peter Jungen, President of the SME UNION stated at the EDS Summer University that the Euro zone problems are deep rooted, structural and selfinflicted. The problems in the Euro zone are not short term. He estimated that the Euro zone needs probably almost a generation to get out of the mess in which it has brought itself through flawed concepts, wrong policies and deficit spending ideologies over the last several decades. They have, of course, not been caused by the rather belated activities of speculators but by the policies of the Euro zone governments. This is now more and more acknowledged by European leaders.
European welfare systems at stake.
The key reasons for the mess are the public deficits, which have been accumulated over 30 years plus, including the unfunded debts of the pensio systems, social security systems and the European welfare states in the whole. They are deep rooted, structural and self-inflicted. What we see is the end of flawed Post-Keynesian deficit policies which are at the core of the European problems - the biggest threat to the European welfare state.
Cutting deficits in the short term is not enough. At least as important is to restructure and to balance the social security systems which are structurally underfunded and overspent running the risk of implosion. At the present speed public debts in Euro zone will grow rather than being reduced.
Europeans have neglected the basic principles of a single currency regime Europe has violated the pre-conditions of an European optimal currency region which are flexibility of labour, flexibility of services, flexibility of entrepreneurs and flexibility of capital. As this is achieved for capital and to a large extent also for entrepreneurs it is still very restrictive for services and not yet achieved in full on the labour market. Therefore a self proclaimed social Europe should allow workers to move freely which is a precondition for a European optimum currency
region. Those who block the internal markets in this respect attack the stability of the Euro - knowingly or unknowingly!
Competitiveness at the core
The core of the problem is not just public deficits, it is about competitiveness. Some countries have improved their competitiveness - most not. If real wages have gone up in Greece by almost 40% between 2000 and 2008 than they need a correction as to that amount. But that will not be enough. Structural reforms in labour market, taxation, pension funds, health care, unemployment insurance and similar social institutions are necessarily in order to keep the system from imploding. Economic freedom must be increased in almost all Euro zone member countries.[
Stability and growth pact effectively suspended in 2003
One more step of a self destruction process in Euro zone was the decision initiated by Germany supported by France when both were confronted with the threat of sanctions for their failures to respect the deficit limits in 2003. We now see the longer term effect of the very bad decision made in November 23rd 2003 where effectively the stability and growth pact was suspended by the ECOFIN ministers.
Greece not the only problem
Greece is a bad example, but not the only country with similar problems. The vast majority of the Euro zone member is constantly violating the Maastricht criteria. To bring them back in line with the criteria in terms of current deficit in debt to GDP may well take more than 20 years. The question is whether the Euro zone has that much time left as the underlying problems are much deeper.
ECB decisions created a lack of trust
The problem with the recent decisions of the ECB is that they have created a lack of trust by entering into a buying spree of government bonds which is an attack on the fundamental principles of the European Monetary Regime. We have to be careful that we are not entering a phase where sovereign debt will be the new subprime. Already countries like Russia or Egypt borough cheaper than some Euro zone members.
The European Financial Stability Facility only buys time to make mayor
The European Financial Stability Facility fund will just buy some time to make mayor corrections. If the time is not used decisively it may well be the end of the
European monetary regime as we know it.
Much stricter Euro regime necessary - Emphasis on prevention not on bailout!
The necessary steps are therefore:
- A much stricter monetary needed
- Early sanctions to be imposed automatically – no political decision
- All member countries agree on introducing a ceiling to national debt.
- Member countries have to agree on structural reforms of labour market, of
pension funds, of health care systems, unemployment insurance and other
social protection systems as the best example of an European economic
- Violation of the Maastricht criteria for two or three years should kick off a
strict insolvency procedure.
- Debts to be restructured under the supervision of a European “Debt Watch
- A European Monetary Fund (we may need a better name for that) would assist the restructuring or insolvency procedure with using funds only in case of unanimous approval of the member countries.
- As a last resort the possibility of kicking out a country which consistently violates the Maastricht criteria is necessary.
- The necessary funds would be collected over time from those countries who are violating the Maastricht criteria from the very beginning onwards
- As almost all members are violating now it is a good starting point to slowly build up a necessary fund. These should be paid into a “Euro Debt Restructuring” Fund in order to finally be able to accompany restructuring and a possible insolvency process.
- The stability and growth pact has to be adopted to lower the debt to GDP limit and to aim for zero current deficits - no further deficits to be allowed.
- A zero debt policy from now on is the only way for the Euro zone to get back on track.
Best option for Greece: Debt restructuring as soon as possible!
The debt burden put on the active, younger generation could be driving them out of Greece. Therefore the best option for Greece might be an orderly restructuring as soon as possible. A return to the capital markets will only be possible if the uncertainty concerning the possible default is abolished. As long as there is a risk that this is going to happen, a return to the capital markets will be very difficult. Greece’s public debt will approach 150% of GDP in spite of the bail-out. More than 130 billion € have to be refunded between 2010 and 2013 which equals the European support.
European Financial Stability Facility to limit to 3 years – no extension.
An extension of the three years period of the European Financial Stability Facility will not be accepted. It would be a further blow to trust in the ability of the European institutions and Euro zone governments to correct the unfortunate development and to bring the Euro zone back on track..
EU Commission needs to come up with tougher proposals
Peter Jungen asked the Commission to come up with much more strict proposals than they have presented until now. Any delay bringing this about will not only increase the problem but reduce the trust in the ability of the European institutions to properly deal with these problems which are basically self-inflicted. It is absolutely necessary that these proposals are put on the table, discussed and adopted between the next 12 to 18 months. Even if this is very tough for the European institutions otherwise it will not have a tough impact on the markets and the position of Europe in the world. The European leaders have to decide in the next 12 to 18 months not only about the future of Euro zone but about the future Europe in the interest and in particular of the next coming generations. They can expect that the two generation which have created Europe but also have created major structural problems put the house in order for the next
generations to be able to live in it.
For the Euro to survive Europe has to reinvent itself
Only if the Euro zone countries live up to the challenges by focussing on increasing growth potential and competitiveness through Innovation and Entrepreneurship the Euro can survive. By focusing on innovation through entrepreneurship as the basis of economic dynamism Europe has a chance to reinvent itself. Key issues are to improve conditions for better education, for new entrepreneurs, for more start-ups, for better access to equity finance, for more Business Angels and for more Venture Capital.
This is the only way for Europe to slow down the relative decline in an ever faster
changing and faster growing world dominated by the renaissance of Asia. The “EU-2020” is not enough for that after the Lisbon-Agenda failed already!
Europe has to reinvent itself remembering on which values and thoughts Europe’s wealth and prosperity is based.
Further information: firstname.lastname@example.org, www.sme-union.org; Tel: +32/2/233 38 38
SME UNION (Small and Medium Entrepreneurs Union) of the EPP (European People´s Party) is the
network of pro-business Christian-Democrat, Conservative and Liberal politicians and political organizations.
Its main objective is to help in shaping EU policy in a more SME friendly way. www.sme-union.org
- Mesaje : 919
Data de inscriere : 13/04/2010
Varsta : 68
Localizare : Bucuresti
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