Call for decisive action
European debt crisis seems to be taking an ugly turn. Previously, the debate about the measures to resolve the crisis was mostly confined to the EU countries but some of the other players, of late, have also joined the fray. The outgoing World Bank Chief, Robert Zoellick, in his latest interview argued that European leaders dealing with the debt crisis have done too little, too late. Speaking rather sarcastically, he said that "European politicians always act a day late and promise one euro too little. Then, when it gets tight, they add new liquidity. While that bought time, it did little to address the eurozone's structural problems." If Europe continues to falter, it would lose global influence. While a Greek exit from the euro would have enormous consequences, Europe should not allow itself to be held hostage by Athens. Talking about the impact on developing countries, Zoellick added that ripple effects are making everybody's life harder. Uncertainty in markets was starting to increase costs for developing countries and the developing nations needed to brace for this uncertainty. World leaders meeting in Los Cabos, a Pacific resort, had also similar views. Group of 20 countries (G20), representing more than 80 percent of world output, were expected to urge upon Europe to do whatever it takes to do to combat the eurozone's debt crisis after a victory for pro-bailout parties in a Greek vote reduced the chances of a euro break but failed to calm financial markets. On the other hand, European Union countries, unlike their past behaviour, seem to be digging their heels and losing their patience in the matter. EU Commission Chief Jose Manuel Barroso retorted that "we have not come to the G20 summit to receive lessons on economics." The crisis originated from North America and not from Europe. Much of the financial sector in Europe was contaminated by unorthodox practices in financial markets of other countries. Barroso also added that he expected the G20 leaders to speak very clearly in favour of the approach the EU was following. The difference in approach to resolve the crisis may reflect dissimilarities in character, thought process or just expediency to deal with a certain situation. For instance, while Europeans are generally more cautious and discerning, North Americans tend to act more nimbly and in a presumptuous fashion. Also, North Americans generally tend to overlook the fact that situation in every European country is different and a proper consensus is very hard to build on issues which call for sacrifices from some countries due to the mishandling of economies by the others. After all, bailout packages cost huge amounts of taxpayers' money, which the political leaders in countries like Germany would not like to dish out easily and continuously. Therefore, it was very difficult to adopt a common approach for the Europeans and other stakeholders should not treat them as a homogenous unit speaking with one voice. Anyhow, disagreement on the issue which has been lingering for a long period was certain to emerge at some point of time. Seen closely, everybody is partly correct. For obvious reasons, while most of the G20 leaders were pressurising Europe, the world's richest region, to give more support to indebted eurozone members to kick-start growth and pull the eurozone back from the brink of disaster, Germany and France were stressing the point that the region would come up with its own solutions. However, both sides have to reconcile their positions for the common cause of pulling back the world economy from the danger zone. Greece, Ireland and Portugal are already overwhelmed by debt and Spain's banking system is almost on the breaking point. Such contagious diseases spread fast and could consume others if a determined effort is not made to throw a lifeline to the economies in trouble and devise a more integrated and sound financial architecture. Whatever happens at Los Cabos is important but the basic responsibility of implementing the strategy and determining its pace would continue to rest on the shoulders of European countries, especially Germany and France. North American countries may have caused the disease but those who have been affected the most have to pay for the prescription. Countries like Pakistan could only hope and pray that negotiations at Los Cabos are really purposeful, and lead to clear policy choices aimed at eliminating the basic problems confronting the world economy so that everybody could breathe more easily. Failure to take a decisive action at this stage, on the other hand, would have serious implications for global growth and welfare of humanity.
Copyright Business Recorder, 2012