A start has been made. Which of the two different interpretations of the outcome of the G20 summit in Washington on the economic crisis is closer to reality? Some people focus on the fact that industrialised countries, emerging economies and developing countries managed to agree together on objectives, whereas others says that platitudes were simply trotted out. The need for a coordinated approach to boost the economy; better regulation of the financial markets to prevent such a crisis ever being able to happen again; more effective and fairer global economic governance - who could disagree with these good intentions? The situation becomes far more confused as soon as one starts looking at specific action to be taken. Changing the role and powers of the International Monetary Fund? This will be on the agenda at the next G20 summit in the spring of next year. Better regulation of the financial markets? A good idea, but over-regulation should be avoided. And so on. One can understand why some financial and business circles are sceptical.
But at the same time, the very fact that the summit took place, a summit where emerging economies and advanced countries met together and will continue to meet together in the future, is crucial. A common declaration of general principles was agreed upon, sending an important message to public opinion; and it is clear that this is absolutely vital in terms of restoring confidence. The correct assessment was made by the president of the European Parliament - it is “a positive signal”. It was necessary, it is useful, but it is only the start. In terms of what to do in practice, one will have to await the decisions of the new president of the United States, Barack Obama, who will be attending the next G20 summit (in April 2009).
Meanwhile, most action taken and measures planned for the future are at the national level in China, India, Russia and elsewhere. What about in the EU? The directions in which member states are going should converge to a greater extent and the EU should play its full rule. Mario Monti said that the answer is clear for Europe and the answer is the European Union and its mechanisms, institutions, currency, central bank and its democratic basis through the Parliament. All the same…
Two different responses. The financial crisis and the economic crisis are inter-connected but a different response is required for each. In terms of the financial crisis, the EU has to have a genuinely Community system covering both regulation and surveillance. On the other hand, at the current stage of European integration, there is no one-size-fits-all response to the economic crisis because each country faces a different situation. People often talk about disagreement among member states over the direction to be followed, regretting the lack of uniformity and accusing various member states of failing to demonstrate a European spirit. I think this is wrong and often just plays to the audience. Countries that have cut their budget deficit have room for manoeuvre that the others simply do not have and this has to be taken into account - as the chair of Eurogroup, Jean-Claude Juncker, has often made clear. The attempts to set inflationary risks off against the need to protect purchasing power is just as false and demographic an argument because they are part of the same process. Loss of purchasing power for individuals comes from rising prices, inflation in other words. Tackling inflation is a way of defending purchasing power and stability of the euro.
Triumph of the euro - even in the United Kingdom. The triumph of the euro is so overwhelming that people could even stop talking about it, unless they wish to emphasise the British u-turn. It is no longer only Denmark, Sweden, Iceland and eastern member states which are talking more openly about plans to join the euro. Even in the United Kingdom, calls for joining it are no longer made by Andrew Duff alone. The reasons are clear. The pound was worth two US dollars only three months ago but is now worth one and a half dollars, along with all the inevitable repercussions on the value of gross domestic product. People understand that the euro provides better protection against runs on the currency. But what about public opinion? According to the Financial Times, the owners of several newspapers would have to be bought off, the British parliament would have to be convinced and then a referendum would have to be held… It concluded that the polls say it is not possible but that the British are a pragmatic lot. The Observer is more explicit, saying that everyone can now see that the financial sector had too great a role in the British economy (see my column in issue 9776).
Joining the eurozone provides monetary stability. You only need to look at the conditions that Hungary had to agree to in order to get a loan from the IMF to see this. One has to earn the right to join the eurozone and its rules have to be respected. People are beginning to understand that it's worth the effort.
(F.R./transl.fl)