The FPA has gone European over the last while as several blogs addressed the issue of the Greek Tragedy and focused on Europe in concert with a talk by French Finance Minister Christine Lagarde as she addressed the 2nd annual Global Financial Forum, sponsored by the FPA, Chatham House and British-American Business, on global financial regulation and the situation in Greece.
Minister Lagarde’s speech covered the major issues of financial reform that have faced Europe and France in the past and how the current economic situation arose and the most effective methods for dealing with possible future economic Contagion in Europe and abroad. She addressed the problems in Greece as well as how to prevent Contagion toward other at risk countries that investors see as possible next in line victims of the Greek crisis. Their sunny neighbours in Portugal, Spain, Italy and not so sunny Ireland would be saved from a massive bleeding of liquidity on Sunday as the northern Euro economies and the IMF set to finalise a solution. A less than prompt response to the crisis finally came about on the weekend, as Monday morning the markets reacted positively to a $1 Trillion bailout package for Greece. While news on the loans created an initial market boost worldwide, many analysts criticised the lack of concrete reforms to the shallow pockets and unstable economic systems of countries such as Portugal and others that may have as many hidden internal problems as Greece. Actions by European governments in this possible debt crisis sought to quell investor concerns over a lack of solvency in the weaker Euro countries and contain the issues in order that they do not expand to swallow all Euro member states and spread worldwide. Criticisms on Friday of the ECB and the slow handling of the crisis were addressed with much vigour in a One Trillion dollar response. Today the BBC World Service reported on how Portugal’s minority government set out to quell these suspicions with a new bout of reforms in their financial systems and cuts Europe-wide helped to give legs to the over One Trillion dollars put into Greece and Europe this week. The immediate results seem positive, but for One Trillion dollars, what are Europeans actually getting for their money? Greece’s GDP only amounts to $340 billion and Portugal’s GDP is $230 billion as of 2008-2009. The German public who is paying for a good amount of the loan package is still slowly recovering from a bout of job losses and economic problems from 2008-2009. It is likely the case that even if reforms and the recent bailout propels investor confidence forward, the political deficit will not be easily handled. And then there is Britain…
The Tory government in the UK finally settled on a formal coalition in the UK Parliament with Nick Clegg’s Liberal Democrats in order to push ahead with cuts and a historic financial housecleaning that would make Madam Thatcher envious. While the UK is not part of the Euro, a lot of talk this week flooded the media’s debate panels about how the UK’s debt problems are similar or worse to that of Greece. Internal UK politics and policy surrounding how the coalition would treat closer ties to Europe and the degree of cuts that needed to be made were pushed aside trying to convince the British electorate and international markets that Tory’s and LibDem’s are now the best of friends, and that deep political cleavages would be put aside for the sake of the British people and economy. In the end, the electorate chose who they wished to lead the country and to avoid a “British Tragedy,” Britain’s political leaders will have to get along, and likely would have had to make large cuts whether they ran against them or for them in this recent election. Minority governments are not all bad, but the two “elected” parties will have to answer for unpopular cuts this year in the UK, as will governments in Ireland and the Mediterranean…certainly a lose-lose scenario for the careers of many European politicians. Europe certainly is going to be a bit more interesting in 2010.
I encourage all to view the video of Minister Lagarde’s speech. As well, please refer to other FPA blogs on the crisis in Europe as well as those on FPA’s European Union Blog below.
