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Economic Outlook: The Solidarity Prize
If the Nobel Peace Prize was awarded by a committee from the United States, would the European Union have won?
World War II was not fought on American soil, which makes it difficult for anyone on this side of the Atlantic to fully appreciate the cold, irrational cataclysm of a war fought in the streets where children played.
The founding document on this side of the pond, the U.S. constitution, was also signed while the colonies were still young and had, to that point, unrealized relationships.
Imagine writing the U.S. constitution in the year 2002. How would all those states put a union together at that point — after the fact, instead of before it?
The Nobel Committee certainly took the long view this week, giving the European Union the Nobel Peace Prize.
The committee contemplated the shift from complete disarray in 1942 to the effort to share a common currency in 2002, which may prove to be more trouble than it was worth.
Some economists see the eurozone as a clunky mistake. It”s not 17 nations working together, it”s 17 nations handcuffed together.
Mathematically, it doesn”t work to use labor laws and social expectations in Greece and tie them up with labor laws and social expectations in Germany without the inherent flexibility of having separate currencies. Neither can make the simple adjustments needed when one economy or the other spins out of control.
This week in Tokyo, International Monetary Fund Director Christine Lagarde said world leaders had, indeed, established critical programs that now required action.
That note of impatience was playing out in markets as uncertainty, which gives investors shudders, she said.
She said it was time to act on policies that took plenty of work to iron out.
What”s on the table now? Spain is poised to reach out for international assistance, which entails adopting strict budget discipline, which would allow the European Central Bank to begin buying short-term Spanish debt. Leaders are also contemplating a centralized bank regulator in Europe and allowing the European Union the fist shot of budget approval for each of its member states.
That would not mean micromanaging. But it would give group control over tax rates and spending, giving the EU control of each country”s debt to productivity ratio.
Even with the Nobel Peace Prize in hand, some of these changes will require a lot more cooperation to see them through. European Union or not, the concept of giving budget decisions to a central authority is not winning any popularity contests.
But until this week, it also would seem beyond comprehension that German Chancellor Angela Merkel would contemplate a trip to Athens — and yet there she was pushing her new message that there was, in fact, “light at the end of the tunnel.”
Merkel”s visit was not well received by bitter Greeks, who took to the streets with violent demonstrations, protesting the austerity measures insisted on by Germany.
But she showed up, anyway. And you can”t demonstrate solidarity by staying at home.
In international markets Friday, the Nikkei 225 index in Japan slipped 0.15 percent and the Shanghai composite index in China rose 0.1 percent. The Hang Seng index in Hong Kong gained 0.65 percent and the Sensex in India fell 0.69 percent.
The S&P/ASX 200 in Australia was flat, rising 0.07 percent.
In midday trading in Europe, the FTSE 100 index in Britain shed 0.15 percent while the DAX 30 in Germany was off 0.04 percent. The CAC 40 in France dropped 0.23 percent and the Stoxx Europe 600 slipped 0.18 percent.
Copyright 2012 by United Press International