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Christmas with the euro

In spite of the prophets of doom, apocalyptic forecasts and more than pre-emptory opinions, we shall be celebrating Christmas 2011 with the euro!

This will also be true in 2012 and in the years to come. So, it is time to take advantage of this break to look at Europe and its economy in the long term - which is more credible than its troubles during what we might now call "the public debt crisis."

We now have to understand that the public debts will be repaid because Europe has the means to do so; governance is now coming together. The great number of debates, meetings and summits might have led us to doubt this; however these have brought about decisions that were unthinkable just a short while ago. Europe is creating its own economic government, which was lacking, though its shape is nothing like any other that has ever existed... 

An immediate federal leap forwards might have been preferable; history, democracy and political agendas also follow their own paths, which force us take account of certain realities ...

But no one should doubt that one day there will be a European Finance Minister, a common budget that is ten times as big and a free Central Bank. The European Union has started down this path. Towards which kind of policy?

The European economy is not just a minting plate, which long term, inevitably leads to failure. Nor is it based on the old Keynesian, spendthrift system, which only supports growth via public finance and domestic consumption. Today eurobonds and an indebted Central Bank would be a mistake for a Europe whose accumulated wealth - the biggest in the world - is based on a sound economy, leading edge technologies, some of the most performant companies, a trained population, effective public services and an unequalled standard of life.

Europe's wealth comprises centuries of know-how and technical development: more than 90% of the world's inventions which are now part of human daily life, from the car to the helicopter and the internet, from the discovery of the virus to in vitro fertilisation. Nearly half of the world's trade is concentrated here, with a manufacturing base founded on innovation at the service of a modern social market economy. Social costs are certainly higher than elsewhere, but the population approves of this. This is vital because everyone demands, at some stage, to have a share in the wealth that has been produced. Europe is the region in the world where there is the least inequality, including during the crisis. It is the continent of stability, which is an invaluable asset for the future. In this ongoing world competition, it has a better chance to succeed than others.

Of course Europe has to adapt rapidly and accept greater integration. This work has now been started. It will lead to a more rigorous management of public finance (although it counts the lowest public deficits amongst the wealthy countries) and to a vital reduction of the debt (although it is the least indebted area amongst the developed countries). Greater effort is required in terms of productivity and this is entirely possible. Finally Europe can also find a growth path again.

It has the means, as far as its relations are concerned, with the rest of the world: the Union is the world's leading exporting power and the leading provider of development aid, 65% of the total. Internally, it can mobilise its vast resources  (some 340 billion euros in structural funds) and to complete the single market (the most important in the world). It also can easily improve its governance which is far too technical and sometimes too procedural; In privileging technologies and in focusing on what is important, it does have capacity for sustainble growth that will be stronger in the long term than the emerging countries that are simply catching up.

It just has to believe in itself.

How can we ask the financial markets to take Europe more seriously if we do not believe in it ourselves? However, if we stand back, and apply a bit of common sense and look at the decisions that have been taken by Europeans recently, all plead in suport of Europe's amazing capabilities.

Nothing justifies the feeling that we are declining. Manything points to hope. Above all, our duty is to believe that the fantastic path that Europe has already covered is the foundation for the legitimate optimism of its citizens with regard to the future.

Merry Christmas!