The economic debt crisis and it’s impact upon European citizens
Result of Phase 3
Solving the debt crisis is a complex and long term goal, however one which must be tackled in order to ensure the survival of Europe as we know it.
So how can a solution be reached? Here we look at some suggestions:
BBC’s Business Reporter, Laurence Knight wrote of how ‘the economic and financial solutions to the eurozone crisis are actually surprisingly straightforward’.
So how?
‘Easy’, he says. ‘Just ask how the exact same problems have been solved by the members of that other large single currency area – the United States of America’.
So if the eurozone is to look at the USA model for inspiration in seeking a solution, what sort of changes – economic, financial and political may need to be considered?
1). Create a banking union
Europe’s most immediate task is to restore confidence in its banks. All of Europe’s banks may need to be placed under a common regime of regulation and supervision, with troubled banks given equal access to rescue loans, and being wound up by a central authority if they go bust.
2). Implement a political union
To make a banking and monetary union work, eurozone government would need to hand power to a central authority (such as the European Commission) so that national governments accept that in future they have to keep their own spending strictly within their limited means.
3). Signing up to a growth pact
European countries must sign up to a ‘growth pact’ – a set of reforms designed to boost economies and mitigate the pain being inflicted by government spending cuts across the continent.
The eurozone may also need to pay for large-scale investment in infrastructure, particularly in southern Europe. Proposals include increasing the European Investment Bank’s ability to lend and create common ‘project bonds’ to finance major construction.
4). Structural reforms
Particularly labour market reforms play a key role in helping to ‘rebalance’ Europe by ensuring that wages in areas of Europe do not rise too quickly to bring them in line with more developed European countries, as they did in the past decade.
In order for these changes to be successful, a multi-level democratic model should be considered to integrate the different decision-making levels in Europe, set clear rules concerning the competencies and ultimately ensure sufficient democratic legitimisation and the survival of Europe as we know it.
Result phase 2:
Here we look further at the economic debt crisis and who can and should be involved in helping to tackle these very important issues which are impacting upon so many.
We feel that there are a wide range of stakeholders who this crisis has impacted upon, and therefore it is these stakeholders who must work together to solve the issue.
Due to the fact that there are so many different countries involved, all with diverse political agendas and different ideas about what will work, this is making moving forward very difficult indeed.
A member of our group came across the following quote from Emma Bonino, the vice president of the Italian Senate and a former commissioner of the UK. While her ideas are perhaps very idealistic and very unrealistic, it does give a clear idea of the vision for solving the problems. She said:
“The E.U. as is stands, is a fair-weather construction, it works only in the absence of economic trouble." The solution, she argues, is the further centralization of political power. Such a move wouldn’t have to be the creation of a single European superstate along the lines of the U.S. Bonino herself has proposed an intermediate solution, in which member states cede only some of their powers — such as foreign policy, defense and border control. Most crucially, it would include a Finance Ministry in charge of economic stabilization, and, when needed, transfers of funds from the central government to individual states. The common political identity, she argues, would make the necessary redistribution more palatable. "Help normally comes only if there is a shared feeling of belonging," she says.
Idealistic proposals indeed, but how in a more realistic sense can we as Europeans take more of an active role in getting our continent where it needs to be economically?
We feel as though the media plays a key role in this. While the media typically focuses on newsworthy items and topics which are of interest to and involve its readers/viewers, it does play a major role in shaping public opinion.
While newspapers and television news programmes are independent entities, the constant communication of how poor the state of various European countries’ economies are does very little to enhance public confidence – in that sense we feel a more balanced view of the issues facing us economically is required from the media.
We also feel that public engagement is vital. In our experience, where citizens are involved in the decision making process for a particular issue, even if the eventual outcome isn’t what they hoped for, they still feel valued in that their views were taken into consideration.
Now that we have determined who should be involved in solving these issues long term, in phase three we will discuss ideas for how these issues can be permanently solved.
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Result phase 1:
Economic instability in the eurozone and even further afield has affected the lives of millions of people. As the uncertainty in Europe continues and the wounds grow deeper for the single currency, pain is also being felt here in the UK.
The topic of economic instability and the debt crisis is a European matter of concern for one simple reason – because it affects each and every European in some way, regardless of geographical land boundaries and language barriers… put simply, we are all in it together.
Here in the UK, as with across Europe, budgets for the provision of frontline services are being stretched to their limit – in fact, a recent report by the Local Government Association (LGA) in the UK said that ‘unless reform is introduced immediately, the money available by 2020 to fund council services like road maintenance, libraries and leisure centres will have shrunk by 90% in cash terms’.
This, they say, is because of the rapidly rising cost of providing adult social care, combined with the growing cost of delivering councils’ other explicit statutory responsibilities like social services, waste collection and concessionary travel, which will soak up almost all of council spending.
Despite the austerity measures as a result of the debt crisis, the LGA is calling on the UK Government to ensure local authorities are not placed in a position where because of these rising costs, they have to significantly reduce, and possibly cut, entire service areas.
Given that people are living longer right across Europe, an aging population and the cost of adult social care provision has the potential to create a serious long term issue for Europe, not only socially but economically too.
The BBC recently produced an information item entitled ‘Eurozone turmoil and you’, which examined the various ways in which UK citizens are being affected by the debt crisis. We examine some of these issues below:
Mortgages and Homes
The Council of Mortgage Lenders in the UK says that eurozone uncertainly is ‘not a particularly comforting backdrop’ for the UK’s housing and mortgage markers – and that more bad eurozone news could affect mortgage costs, availability and activity
Safety of Savings
As we are all well aware, trouble in the eurozone means trouble for the banks. When Icelandic banks failed in 2008, the UK Government stepped in to protect UK saves with Icelandic bank accounts, but there is certainly no explicit promise to do this again if another country’s banks fail. Also, the interest paid by banks to savers has been at record low levels. Any further eurozone trouble means those rates would rise later rather than sooner.
Outlook for Jobs
The eurozone is the UK’s biggest trading partner, with official statistics showing that nearly 47% of UK exports went to the eurozone in 2011, while nearly 43% of UK imports came from the eurozone.
A long-term spiral of decline in the economies of Europe means less demand for UK goods and services, and could mean significant job cuts, particularly in manufacturing.
While we are all aware that Governments across Europe have been pushing for a growth agenda, the financial uncertainty is leading to a lack of confidence among businesses. This means a pause in new investments and new jobs, most notably for younger workers
We firmly believe that in order to find strategies for solutions to these very important issues, which are impacting upon millions of people across Europe and beyond, each member state must all be ‘singing from the same hymn sheet’ - solving this issue is something which no one country can do alone.
In phase two of this project, we look at exactly who could and should be involved in solving these problems.
