[Viewpoint] Test of the common communityThe global economy is once again being roiled by a renewed crisis in the euro zone. The local bourse is on a roller-coaster ride based on news from the European front. This continuing debacle reconfirmed that the markets and economies of the world have not built up enough vigilance and resilience against external risks and emergencies to keep pace with rapid globalization.
The world has failed to find a replacement for the Bretton Woods system, the monetary and economic order established in the mid-20th century soon after World War II, and one is needed for the new political and economic demands of the 21st century. The new financial crisis gripping the world economy goes beyond the world of economics as it encompasses tricky political problems.
A multifaceted crisis that spills beyond borders and continents should be addressed as a test of the entire global community. The most pressing problem is the devastating state of the public finances of Greece and its spill over effect on the European continent. Heedless public demands for social benefits and extravagant government spending on borrowed funds brought about Greek catastrophe.
But the “curse of populism” cannot entirely explain the disaster. In early May former Greek Prime Minister Konstantinos Simitis, who is credited for achieving the country’s membership in the euro zone, spoke about the crisis during the InterAction Council meeting of former heads of governments in China. He admitted the Greeks are primarily to be blamed, but added that a fundamental problem is rooted in the economic gap among European Union members.
The Greeks can explain today’s fallout from the perspective of economic disparities among wealthier countries and developing, peripheral countries in the EU. The union’s free trade and single monetary system played out in a fundamentally unfair way for the less competitive and weaker nations. More advanced economies like Germany benefited from tariff-free exports of their high technology and top quality products and imports of cheap conventional goods from southern region. On the other hand, governments in the lower league of the EU pursued extravagant policies to make up for the trade and economic imbalance that culminated in the loan and deficit catastrophe.
The argument by the former Greek Prime Minsiter Simitis and his fellow Greeks has a point. What is imperative now is putting out the fire in Greece and preventing a spread to neighboring countries and beyond the Continent. A massive bailout accompanied by austerity prescriptions had been expected to rein in an apocalyptic threat that could undermine the union’s viability. But the recipe of stringent restructuring that requires severe tightening and losses in jobs, pensions and incomes as well as generating a prolonged slump did not agree with the broader Greek public.
The French public has already manifested an alternative choice by electing a Socialist president, Francois Hollande, who has been vocal against the austerity campaign led by Germany as the only means to reconstruct the EU and instead promised an aggressive push to create new jobs and growth. The developments dealt a heavy blow to the austerity policies the EU leadership demanded on heavily-indebted members. Balancing growing social costs while sustaining fiscal integrity and economic growth has become a test and mission not only for the European region but also for all the countries on this globe.
Europe poses questions to us all about how much the public can sacrifice for the security and future of the common community, and the kinds of skills needed by political leaders to present a vision and policy direction to the public.
Former German Chancellor Helmut Schmidt, 94, attended the recent Tianjin meeting in a wheelchair to plea in a feeble voice for cooperation in defending the union that Europeans painstakingly worked to build in the last 20 years to recover from the horrors of dangers of war and dangerous nationalism. Communities face new threats and risks as they grow from smaller units to larger ones. It is the test of our times what willpower and what set of rules we can come up with to confront the new challenge.
* The writer is a former prime minister and advisor to the JoongAng Ilbo.
by Lee Hong-koo