*By Axel Olesen
The financial crisis started in the US more than four years ago. Now, growth has returned
to America while Europe is left behind as the only major region of the world still in a recession– or at best with low growth. The consequences are obvious, especially in Southern Europe, but also in the north, where everything seems to be deep-frozen – not just the weather. This article contains three suggestions for what can be done.
Europe seems to be full of bookkeepers at the highest political levels. There is nothing wrong with bookkeepers, when the job is bookkeeping, but what Europe lacks now is leadership. Europe needs the likes of Churchill, de Gaulle, Schuman, and Monnet.
First and foremost, Europe needs politicians who will take advantage of the fact that even though Europe has a long history of co-operation, the differences remain. These differences can be used for solving the European problems. Emphasizing our diversity would be better than the current over-simplification of the situation by demanding similar standards from countries with dissimilar economic conditions. The populations of Europe are well aware of the differences, so it won’t take much explanation to implement a more nuanced policy.
This article contains three suggestions for what can be done.
1. The Necessity of Kick-Starting Europe
A more nuanced policy could make it possible to kick-start Europe. Everybody knows that the government debt situation is generally much better in Northern Europe than in Southern Europe. It would be possible for Northern Europe to spend more money in order not only to kick-start their own economies, but also to help Southern Europe by increasing the export opportunities for southern-based companies.
The net public debt in Norway, Finland, Sweden, Bulgaria, Denmark, Estonia, Switzerland,
Poland, FYR Macedonia, Latvia, The Netherlands, Lithuania, Bosnia and Herzegovina, Montenegro, and Austria is lower than Germany’s.
The combined size of these Northern-, Central- and Eastern European countries is approximately the same size as Germany; meaning that a simultaneously coordinated stimulus from these countries would be significant. A credible and efficient kick-start of the European economy would be an investment in «soft infrastructure», like education, R&D, broadband, the upgrading of skills, etc.
This is an old-school Keynesian approach. Europe, 30 years from now, could be better off by simply letting the economies take care of the problems themselves. However, the risks for social unrest, human consequences, and maybe even worse consequences are so big that it should be done sooner rather than later (also being in Northern Europe’s own interest). This is the difference between bookkeeping and leadership.
The EU talks about gross debt, but again it is perhaps too simplified. A lender is also interested in what assets you have for collateral. If you are a private person, you could have a huge gross debt, but if you have more stocks and real estate than debt, it really isn’t a problem. Seen from this perspective, measuring net debt puts Spain in a significantly better position than Italy, Portugal, Greece and Ireland and actually somewhat better than France and the UK.
2. Untapped Potential in the Single European Market
Take a few examples from my own country of Denmark:
Denmark’s biggest export market is neighboring Sweden. The Nordic countries often speak of themselves as brother countries, meaning that we have a lot in common culturally, and the Norwegians, Swedes and Danes are able to understand their «brothers’» languages. But Sweden has 9 million inhabitants and our southern neighbor, Germany, has 82 million inhabitants – almost 10 times as many as Sweden.
The Danish exports to Spain’s 47 million inhabitants and Finland’s 5,4 million inhabitants are approximately the same. Both Spain and Finland are EU and EURO-countries. Only a few Danes speak Spanish, and even fewer Finnish.
Of course, our exports shouldn’t be completely proportional to the size of economies or populations, but nevertheless, it tells a story of unrealized potential in the European single market and in globalization as a whole.
I have been to the Basque Country and Catalonia many times and could write a long list of Basque or Catalan products, ideas and mindsets, which could be beneficial to the Nordic countries, and – I think – also vice versa.
But it doesn’t happen, even though it would boost the European economy to a new level.
Why not try some unconventional methods to build up a closer mutual understanding among countries? Why not – for instance – «swap» young unemployed, so that for example young Basque unemployed spent some months in say The Netherlands, and some young Dutch unemployed relocated to the Basque Country at the same time?
3. A Bottom-Up Approach is Needed
The core of the problem is that Europe and European companies lack scale. It takes integration to penetrate the fast-growing BRIC-countries, but – as indicated above – it may also take more scale just to work at a European level.
Mergers and acquisitions are the obvious solutions, but results could also be achieved through co-operation. But co-operation requires agreement between companies.
So there are three keywords:
In the autumn of 2012, NextNordic has run a small process in professional business network called NetværkDanmark (known internationally as Executives Global Network egn.com). This process could hopefully be of inspiration elsewhere.
We have asked members of this business network, «What is Denmark to live off in the future?» and presented the answers and asked the participants to rank what is most likely and most desirable to happen.
The ranking of the most desirable is as follows:
• Public Private Partnerships
• A New Social Contract
When you find other companies with the same desirable future as your own, you have a possible partner.
It is essential that the process is a bottom up process– not designed or decided by civil servants in Brussels, Madrid, Copenhagen or other places, but supported by them.
In essence, what is needed is a referendum amongst European companies regarding the question, «What is Europe to live off in the future?» It can be done at corporate, local, national or European level. After all, Europeans aren’t that likely to listen to authorities. Democracy is a European invention – why not let it solve Europe’s problems?