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Europe facing the crisis : let's have another shot...

The extraordinary European Council meeting on March 1st that looked into the measures to take to fight against the crisis has left us with a bitter after taste. Technical measures were prepared and this is a good thing. We know that Mr Larosière's report on European financial supervision will have real effect. We understand that the banks' "impaired" assets can be contained within harmonised national structures. The tax havens have suffered another blow. Declarations of laudable intent have been repeated: solidarity with the Member States in difficulty, a desire to apply already existing tools to the full to support the economy, a rejection of protectionism and a desire to conclude the international Doha Round. All of this is well and good but is it enough given the extent of the crisis? There is little doubt that it is not. 

In Central and Eastern Europe the request for a plan totalling nearly 190 billion euros put forward by the Hungarian Prime Minister was rejected – first and foremost by … the Czech presidency. However the new Member States' situation is a source of concern. Their currencies are under attack and some of them such as the Polish zloty have lost nearly 30% of their value in the last six months. In this region it is imperative to protect what is vital, ie a functioning financial system, reliable currencies. In spite of a forced debate on the early extension of the euro area, the message launched on March 1st is not the right one.

In addition to this these countries are in acute danger of suffering from the economic slowing forecast in 2009 because they cannot rely on a safety net of accumulated wealth.

According to forecasts the GDP of the 27 may decline by around 2% in 2009. In some of these countries it will be 20%! Together with shrinking investments of nearly 6% for the 27 (sometimes 25% for some), this situation will lead to an insupportable increase in unemployment together with social and economic disasters. By choosing to "deal with matters individually" because the situations in each country are different the Union has chosen a "patch up" policy rather than an overall approach to the European economy. This is a major mistake that can still be rectified. Let us hope that circumstances will oblige us to do so.

We know that ideology and egoism have had major influence over the Council. Some still do not believe in the extent of the crisis or refuse to roll up their shirt sleeves. Is it not true that V Klaus said that "the crisis is like a serious dose of flu; whether we take care of it or not you have to wait for a week and then it will cure itself."

The Member States are also not playing the game of an integrated Europe. On a monetary level it is in federal mode. This is what has enabled the Euro to protect us and to save our financial system. However this is not the case with regard to the budget; everyone is announcing their own plan and the Commission pitifully attempts to coordinate these afterwards. Real coordination comes before the announcement of the anti-crisis plans not afterwards!

The present period offers us a unique opportunity to move towards greater economic and budgetary integration between Member States. A joint announcement by Germany and France on the measures they are going to take to support an industrial sector, to borrow together for example would suffice – everyone would then understand that an inevitable political will does in fact exist. Immediately others would join them and take the whole of Europe towards the solution of the crisis, because the markets, the ratings agencies and the populations would understand that nothing can change a strategic alliance such as this since it has the means to stand up to the present problems.

But because there is a lack of political leadership, no one seems in the present circumstances to perceive an opportunity to unite Europe more rapidly which is in danger of no longer being able to rely on anything or anyone in the world.

Let's take another shot at getting it right!...