Contrary to popular belief that increased lending, first in the financial and corporate sector and then on a country level, is the key source of Europe’s problems, it turns out that this may be just the tip of the iceberg in a series of many structural problems, namely: reduced global influence, low growth, population aging, reduced competitiveness against developing countries, increasing energy dependency, and loose coordination among participating countries. Overall, Europe is quickly losing momentum in the global economy as it becomes more and more “yesterday’s news”. However, the solution may exist in what we call the “large” Europe scenario.
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*This post has also been published, in an adapted form, in a recent issue of the GeoPolitica journal (http://www.geopolitic.ro).
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** UPDATE June 2013 **
Evidence in favour of our “Large Europe” scenario is coming from everywhere!
Following the admission of IMF’s officials of the errors involved in the estimation of the impact of the austerity measures on the Greek economy and the recent IMF mea culpa, now, the EU political leadership is moving towards the "large" Europe scenario, described in this discussion, involving less austerity and more growth initiatives.
First, Schauble argues in favour of a multi-billion stimulus to boost growth in the European South. And then Barroso urges EU leaders to be more bold on so-called structural reforms that can deliver growth and jobs. He also underlined the need to spend smarter on research and innovation, also a key recommendation of our “Large Europe” scenario.
European Council’s President, Herman Van Rompuy, in his keynote opening speech at the European Business Summit 2013, also mentions many of the recommendations of the “Large Europe” scenario, including the need to focus on growth initiatives, competitiveness, and selected high potential areas like the energy sector.
Admittedly, all these are easier said than done; however, this is definitely a start towards a different direction with more focus on development and growth.
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