The current economic crisis is subjecting the entire “EU system” to conflicting pressures. On the one hand, the search for a synergistic and coordinated approach to economic policies would undoubtedly be facilitated if its joint institutions were performing well.
At this event to launch the latest edition of Aspenia, the focus of debate was the fact that diverging trends in the world’s major economies have been made more patent than ever before by the financial crisis that erupted in 2008, and which, particularly in Europe, has since transformed into a sovereign debt crisis. Chief among these divergences are the almost opposite trajectories of emerging markets compared to those of traditionally advanced economies, the divide between Europe and the United States, and glaring disparities within the European Union.
Attendees at this National Conference examining the Italian banking sector noted that, according to economic theory, the financial system has a fundamental role to play in intermediating savings, allowing an efficient allocation of capital with consequent gains in productivity and wellbeing for the entire economy. In the recent past, however, this primary function has been compounded by others that have contributed to a distortion of the financial sector’s role and its relationship with the real economy.
Discussions at this national roundtable session got underway with the opening premise that the economic crisis and its social consequences have profoundly called into question the prevailing economic paradigm – a model based on competitive individualism, maximizing the profit of the individual, and an “invisible hand” regulating the market. The result is that the idea of the common interest merely being the sum of individual interests no longer seems sustainable in the current economic and social climate.
The current financial crisis has thrown into sharp relief the close links that exist between monetary policy, the banking sector, sovereign debt, and serious imbalances within the Eurozone. The vehemence and longevity of the crisis have called into question the very political structure of the European Union as well as its institutional architecture, both in need of modification through a more rigorous application of existing rules, but also by means of the assignment of new responsibilities and the creation of new mechanisms.
As Altiero Spinelli once observed: “Europe will not fall from the sky”, but rather needs to be built from the ground up with the involvement of everyone. These words served as the opening premise for discussions at this Aspen Junior Fellows Conference on the new challenges that will shape the cohesion and future of the European Union. On one hand, the Conference set out to address the question of the kind of new models that could guarantee prosperity and employment for all Europeans by mitigating the widening imbalances between generations.
Kicking off discussions at this national conference was the observation that the current financial crisis, evidently systemic in nature, is predominantly being shaped at this stage by perceived risk factors linked to vulnerabilities in the real economy and the banking system. Efforts in the political, economic and monetary arenas – both at national and European levels – seem to have eased speculative pressures on the markets and tentatively restored international investor confidence.
At this national roundtable dedicated to the quest for a sustainable development model, it was noted by way of preface that overcoming the crisis and returning to past growth is the outlook – or imperative, hope or delusion, depending on your point of view – which has dominated public debate, analyses, scenarios and action plans in Western countries in recent years.
The Dialogue session got underway with the observation that the world economic recovery has failed to alleviate the social impact of the crisis, with the improving economic situation having no appreciable effect on employment. The participants highlighted that this phenomenon affects both workers in more mature sectors – that is, those most exposed to the consequences of globalization – as well as younger people, who are just entering the labor market.
Discussions at this national roundtable session got underway with the observation that the idea of introducing European public debt securities – or so-called Eurobonds – is not a new one: indeed, it dates back to 1993 when Jacques Delors proposed, albeit in embryonic form, the issuance of European bonds to finance investment in European Community infrastructure.
This international roundtable, which saw the participation of a delegation from the Chinese Ministry of Foreign Affairs, provided an opportunity to discuss developments in the euro crisis and China’s views regarding the same. The core issue debated regarded the nature of the crisis and the motives behind the speculative attacks against certain countries.
Three major issues stand out in the list of challenges currently facing the Western world: (1) medium-term trends in the global economy, with special focus on new sources of growth, rebalancing and decoupling; (2) the European debt crisis, its outlook and possible solutions; and (3) green energy as a growth driver.
The last minute lifeline thrown to Greece to keep it from possible default opened a series of urgent questions on the future of the single currency, Europe as a political entity and, more in general, the relationship between finance and the real economy. The crisis concerned not only the precarious economic and social situation of Greece – which will inevitably have to pass through a period of deep-seated and predictably painful restructuring. It also shed light on the series of actions that should be taken to prevent possible contagion with other European countries.
After the crisis, a new paradigm of development is emerging: more solid, anchored to shared values and projected to the construction of a future beyond the ordinary handling of the emergency. Over recent months, there has been discussion on the wave of moderate optimism brought on by commentators and economists, with figures in hand, to pronounce the imminent end of the economic and financial storm that occurred after 2008.
The global economic crisis is reshaping the energy system in a fundamental way, as extraordinary events have occurred in a very short time span. Six issues appear the most crucial in the current context: i) the discovery of shale gas, a transformational event which was also a consequence of high natural gas prices. According to a recent account, this discovery could potentially turn the US into a permanent net exporter, with dramatic implications on the market for liquefied natural gas (LNG) which now seeks markets when global demand is contracting.
The financial crisis has considerably modified the environment in which Italian firms operate. It has introduced new problems in the export sector that are related not only to structural changes in the capital markets but also to difficulties in accessing credit.
The Conference got underway with a general discussion on a fundamental question: in the new world order, is Europe’s importance destined to wane – no matter what? Leaving aside the impact of major international trends (such as demographic changes), which have reduced the relative influence of the EU in objective terms, the participants pointed to various internal factors as constituting constraints on Europe’s potential. First and foremost of these is the difficulty of reconciling the sovereignty of the various Member States with the authority of Brussels.
The members of the first panel analyzed the multiple repercussions of the crisis that began in 2008 on the Western economies, as well as on their political systems and societies. The impact has been profound, putting in question the growth model and the sustainability of the welfare state in its current forms. Major tensions have also emerged between short term needs – such as the bailouts – and longer term goals. The very close link between modern states and capitalism, which in the Western world is captured by the expression “market democracy”, has become more evident than in the past.
The event was introduced by the reflection on presentism, or the lack of collective attention in a country overly concerned with the present and which is losing its strategic vision. Presentism is the product of “real time” which has been brought on by technological advancement. Faced with weighing benefits in terms of quality of information and the growth of opportunities, the present has expanded and it has taken over our past and future. In this way, in economic terms, the world financial crisis came about due to an excessive focus on the short term.
The participants at this roundtable session noted that Pope Benedict XVI, in his recent encyclical entitled Caritas in veritate, reiterates that “the world is in trouble because of the lack of thinking”. It would seem that modern life, with its daily challenges, is focusing minds on more immediate and direct concerns. Today’s cultural impoverishment and loss of ideals has generated a fear of living, thought and reflection.
