European Student Think Tank

South­ern Europe is burn­ing. This crisis has turned out to be the great cata­lyst expos­ing national ills of pre­vail­ing polit­ical and bank­ing sys­tems. Con­ven­tions were over­thrown and polit­ical estab­lish­ments dis­mantled; yet, Europe seems to be on hold, or in slow motion at best, wait­ing the Ger­man elec­tions. In the mean­time, a toxic envir­on­ment is breed­ing, European cohe­sion is eroding.

As another expec­ted Euro crisis unraveled in Cyprus, a con­sec­ut­ive round of crit­ical exam­in­a­tions of the com­mon cur­rency is required. Instead of repeat­ing the same man­tras of lost inde­pend­ent mon­et­ary policies or severe dif­fer­ences in the European eco­nom­ies’ busi­ness cycles, another approach is needed. Per­haps the incon­veni­ent truth and the neg­at­ive unin­ten­ded con­sequences of the com­mon mar­ket are the fact that with one cur­rency, fluc­tu­ations in the European Union min­imum wage are inher­ently cre­at­ing det­ri­mental imbalances.

The Euro-zone has entered an expec­ted con­sec­ut­ive reces­sion, which has res­ul­ted in dimin­ish­ing pub­lic con­fid­ence in EMU policy-making. With neg­at­ive growth pro­gnosis in the Euro-zone, issues have been mul­ti­plied and solu­tions sim­pli­fied. As a res­ult such a det­ri­mental status quo exacer­bates the incon­veni­ent truth about the com­mon currency.

The European eco­nomy is in the midst of the deep­est reces­sion since the 1930s. Although its size and extent are excep­tional, the crisis has many fea­tures in com­mon with sim­ilar financial-stress driven reces­sion epis­odes in the past. Signs of improve­ment have appeared recently, but recov­ery remains uncer­tain and fra­gile. For­tu­nately, the EU’s response to the down­turn has been swift and decis­ive. At present, gov­ern­ments
and cent­ral banks are well aware of the need to avoid the policy mis­takes that were com­mon at the time of the Great Depres­sion, both in the EU and elsewhere.

EST ambas­sador to Croa­tia, Henri Erti, takes a look at the EU’s next mem­ber, Croa­tia, and provides an over­view over its cur­rent eco­nomic situ­ation and future prospects.

Recently Prof. Joseph Stiglitz, one of the world’s most fam­ous and pop­u­lar eco­nom­ists presen­ted his latest best­seller “The Price of Inequal­ity” at an event of the Ger­man Coun­cil on For­eign Affairs. EST’s Stylia Kam­pani was around and presents a sum­mary and some thoughts on its content.

While the rampant inferno of the fin­an­cial crisis has been tem­por­ar­ily con­tained, Fin­land has recently stunned EU lead­ers, who have been pro­mul­gat­ing the import­ance of the fin­an­cial bail­outs for both Greece and Spain by con­tem­plat­ing a Finnish exit from the euro­zone. Henri Erti explains why Hel­sinki believes this might be wise.

While the crevice of the EU credit crisis is dis­sem­in­at­ing, the core issues, which are pain­fully ver­it­able, have remained remark­ably tacit. As a res­ult, the trouble­some reluct­ance to address the fun­da­mental issues of the crisis has raised ques­tions on what must be done to regain the eco­nomic growth of the EU. Henri Erti tries to give an answer.

Ser­bia in the EU? The scen­ario sounds feas­ible: the found­a­tions of the EU-Serbia rela­tion­ship were laid back in 1997 with the Regional Approach (when the EU Coun­cil of Min­is­ters estab­lished polit­ical and eco­nomic con­di­tion­al­ity for the devel­op­ment of bilat­eral rela­tions), and now the European Coun­cil has offi­cially gran­ted Ser­bia the status of can­did­ate coun­try (March 2012). How­ever, since the national elec­tions in May, the IMF and the World Bank have been extremely crit­ical over the new government’s move to increase par­lia­ment­ary con­trol over the National Bank of Ser­bia (NBS).

The World Bank recently pub­lished a report which served as a reminder of a fact that is eas­ily for­got­ten these days: The European Union is a suc­cess story when it comes to eco­nomic growth and stand­ards of liv­ing. The key to suc­cess has been regional eco­nomic integ­ra­tion: The European Single Mar­ket has allowed enter­prises and work­ers to make use of busi­ness and job opportunities.