[Viewpoint] Europe’s leaders must act fastWayne Douglas Gretzky has been called the “greatest hockey player ever.” The Canadian native was named the most valuable player by the National Hockey League — a professional league of Canada and the United States — for eight consecutive years from 1980, earning the moniker as “The Great One.” When he retired in 1999, the NHL also retired his jersey number 99.
When sports channel ESPN asked American viewers who their all-time sports hero was, 24 percent named All-Star basketball player Michael Jordan, while 76 percent picked the Canadian hockey player. Gretzky had signature puck-handling and famously said, “I skate to where the puck is going to be, not where it has been.”
Politicans in charge of the world’s economies could learn from these famous athletes, especially as the European debt crisis goes from bad to worse. As leaders dillydally, the world has been kept on suspense. But money, strictly guided by practicality, has been on the move. Greece fell into technical default after a capital exodus and Spain had to plead for rescue loans.
The people of these countries know their domestic affairs the best. While protesting on the streets with banners against austerity, Greek and Spanish people withdrew money from their national banks to place them in safer German bonds. These countries own citizens are behind the bank runs in the two countries as well as the surge of German government bond prices to record highs.
Greeks are being told to raise their competitiveness by devaluing their currency and leaving the euro zone. But they cannot easily swallow advice that would have dire consequences on their everyday lives. Returning to the drachma could reduce public debt burden denominated in euros, but life would be in chaos due to serious instability.
Greeks could also face the serious inflation that Argentina, Ireland and Russia have all suffered. Retirement pensions would decrease in value by half, and per capita income would slip from the current advanced level of $27,875 to midincome levels. So much as they abhor stringent austerity measures, the Greeks cannot exit the euro.
And in Spain, the emergency funds supplied by 17 euro countries will only provide temporary relief. The inflow of funds will calm the jitters for now, but problems will keep on brewing amid economic stagnation, fiscal woes and asset bubbles.
Italy, the euro zone’s third-largest economy, is next on the hit list. The financial epidemic is certain to be contagious and will demand similar emergency attention to keep the euro viable across the Continent.
Looking back, the founders of the euro may have been too naïve and idealistic. The skeptics may have been right. At the end of the day, the single currency may only benefit powerhouse economies like Germany at the expense others.
The European Union now has two choices. The Germans can risk inflation and intervene through the European Central Bank to increase the liquidity or resort to aggressive quantitative easing like that undertaken by American officials after the Wall Street meltdown a few years ago. The other is to let the southern periphery economies become poor. Austerity, tightening and streamlining would not only mean lower consumer prices but also lower consumer incomes, recession and perhaps even a depression. One thing is clear: Europe’s heyday is over.
Kim Seok-dong, the chairman of Korea’s Financial Services Commission, warned last year of an inevitable Greek default and a prolonged European fiscal crisis. Whether the culprit is the private sector or public debt, a crisis will be painful all the same — and not just in Europe. But faced with the potential of an even more serious crisis, the troubled European countries are even less willing to get their acts together than ever before. At the same time, stronger counterparts like Germany are quickly losing their patience.
But European leaders must act if there is to be any chance of avoiding an entire meltdown. As Gretzky once said, “You miss 100 percent of the shots you don’t take.” If European leaders don’t go after the puck, they won’t able to cut off the downward spiral. They must not spend time deliberating on the outcome and instead take Gretzky’s advice by moving toward where the puck is going to be.
by Lee Chul-ho