Ten days ago, 15 September, marked the third anniversary of the Lehman Brothers bank collapse. That date was the defining moment which unleashed a global crisis that had simmered beneath the surface of the financial world for well over a year. Lehman’s collapse would reveal itself as a veritable financial disaster and its reverberations and consequential domino effects are still being felt to this day.
The chronology of events since that day makes for breathtaking reading. Markets worldwide were savaged and prestigious names in finance and industry, bulwarks of the brave new world of globalised economics were tarnished and imperilled and some would ultimately fall. Obviously, recession reared its ugly head and hundreds of thousands lost their jobs. 2009 and 2010 would mean policy makers had their work cut out to restore stability to a ravaged financial world rocked by years of over confidence and hubris not seen since the Great Depression.
As if this was not enough, the effects of gigantic governmental bailouts for distressed banks revealed an even darker reality. Years of profligate public spending exposed the fragile state of many economies, mostly in the western hemisphere. Iceland imploded followed later by countries like Ireland, Portugal and Greece. Doubts have now spread to Italy and Spain with unsavoury consequences to their respective economies and beyond. Yet Greece remains the Achilles heel that has lead to the current eurozone crisis.
Greece remains the focus of attention for many reasons. In the space of one year the European Union has already fleshed out two significant bailout packages for this country. There have been many toings and froings, much recrimination and debate, but so far European leaders have shown a steely resolve to find a way out of this crisis that is threatening the euro project. This in turn has other unpalatable side effects. It could put into doubt the whole European project and even re-ignite the flames of another global recession.
Evidently, Greece’s structural deficits, its shady practices and fiscal indiscipline coupled with an insurmountable debt pile are proving too much for the EU. Greece has now been in the eurozone for 10 years. During this period of time it lost an opportunity to restructure and has evidently become increasingly uncompetitive, making its chances of any realistic recovery even more difficult. All this is leaving the European Union lurching from one solution to the next. The dithering is rocking markets as a viable solution remains on paper. To boot, citizens in countries such as Germany, The Netherlands and Finland are becoming increasingly vociferous as they oppose more financial aid. They are making their positions clear at the polls − there is no doubt that Europe’s leaders are between a rock and a hard place.
What happens next is really anybody’s guess. Some financial pundits believe there will be a final resolution when the Greek burden is more fairly distributed among the member states. At the other extreme others claim Greece’s exit from the euro would not only splinter the Union but ultimately fracture it. Clearly, Europe’s leaders will do their utmost to avoid unravelling several generations of policy building that has made Europe what it is today.
Malta has not remained immune to the economic shocks of the past three years. It has been a very difficult legislature that has had to contend with a surprisingly big number of economic challenges for a small and open economy like ours. Although some would have us believe otherwise, Malta has weathered the storm quite well. We have managed to reverse the negative trends witnessed during 2009 and came back strongly in 2010.
Evidently, many outstanding issues remain and the latest Moody’s report, undoubtedly inspired but the latest goings on in Europe, could not afford not to point out the finer but strategic policy changes we require that would ensure our sustainable growth and stability of our economy.
What continues to irk me is the partisan approach that still lingers when faced with the economic challenges that lie ahead. Is it not time that political interests converge at least on such vital matters, to seek out lasting solutions in the national interest beyond the electoral cycles that generally guide political policy? One lives in hope!
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