Has Europe 'lost all hope' of recovery?
by Justin Stares
This year's Brussels Economic Forum enjoyed a record attendance, though the mood was bleak. Justin Stares listened to both the speeches and the anecdotes exchanged over coffee and lunch – his verdict does not make for happy reading
As deaths go, it could hardly have been more dramatic. Tommaso Padoa-Schioppa, the father of economic and monetary union and a former Italian banker and foreign minister, invited dozens of friends and family to dinner - telling them he had "an important announcement to make". He stood up to speak, but before he came to the announcement he muttered: "I don't feel well" and collapsed. Half an hour later, despite the efforts of doctors among the diners, the 70-year-old was dead. Shocked guests never found out what he was due to say.
Padoa-Schioppa passed away in December 2010, though he was still very much on the minds of those who attended last week's Brussels Economic Forum, an annual event organised by the European commission. One of the keynote lectures has been named after the former minister. Economic and monetary affairs commissioner Olli Rehn told the packed hall with evident sincerity that he missed his friend "very much". Stories of Padoa-Schioppa's last supper were exchanged during the coffee breaks among the record 1,500 forum attendees.
Had he still been alive, the self-professed lover of taxes might have been invited to suggest ways to fix the infernal machine he created. In his absence, university professors and commission officials were forced to tread over the same old ground. Some advocated more austerity and some favoured stimulus packages. Others put forward technical solutions that fell halfway between the two. Beatrice Weder di Mauro, a board member of Swiss financial services giant UBS, said debate was to an extent pointless; the crisis was mutating at such a frenetic pace that the markets had probably taken policy-making out of the hands of governments and European Union officials, she said.
While the commission tried to accentuate the positive, the mood on the sidelines was bleak. "I've come here to find out if anyone actually realises what is going on," an analyst from Absolute Strategy Research, a British company, said over coffee before the forum began. By lunchtime he had his head in his hands. "I've lost all hope," he said. "These people complain that the markets concentrate too much on the short-term. Well that's true: they do look at the short-term. The crisis is happening right now and the question is - what are you going to do about it? No-one has a clue."
Meanwhile, one well-known university professor stated: "You can always rely on the member states to mess things up. In Spain, they used money from the deposit guarantee scheme to bail out Bankia. Small investors were encouraged to buy shares and now they're worthless. No wonder people have turned against Europe." The Greek government came in for similar criticism. "In Greece, they added taxes to the electricity bills," the professor said. "And what is the result? People are no longer paying for their electricity and the electricity companies are going bust."
An official from the commission's directorate-general for competition wondered optimistically if the peripheral member states might enjoy an Argentine-style export-led boost - if forced out of the eurozone. "You can't keep forcing austerity on people; they just don't understand," she said. "Don't look to Argentina for the answer," replied the professor. "Imbalances there have built up again. They're going from crisis to crisis."
Back in the forum hall, the EU was – perhaps, for the first time - taking advice rather than giving it. "Fiscal policy alone cannot bring sustained growth," warned Jong-Wha Lee, a senior advisor to South Korea's president. Member States might like to try "spending more" or even creating "higher inflation", Lee suggested. Remarks that will, no doubt, ensure that the commission never invites him back to talk. "I don't see a truly different alternative to what we are doing," pitched in Lucio Pench, the commission's director of fiscal policy. "Just putting end to austerity is an impossible hope."
Finally, a young woman from the commission's directorate-general of economic and monetary affairs uttered: "This is my first time at the forum, I still don't know what is going on or how it works." In response, PublicServiceEurope.com – having listened to a panoply of panicked voices on the conference platform and beyond - replied: "Don't worry, neither does anyone else in this room." Rather than being near its end, it appears the real crisis could be just beginning. And, at this stage, it seems there is little in the way of strong leadership among Europe's finest politicians and officials to stop the rot.
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What a really excellent and interesting piece of writing, all with a nice tinge of humour. Wish there was more writing of this quality.
Maggie Stanfield - Edinburgh, Scotland