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…
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.