A lesson on optimism is something Europe could learn from the United States, quipped Ireland’s former prime minister at the ULI Europe Paris 2011 annual conference in February. During a session that looked at the European nations’ future over the next ten years, Ambassador John Bruton, now chairman of IFSC Ireland, suggested that Europeans see problems that can’t be fixed, whereas Americans see challenges for which solutions have not yet been found. Tellingly, 48 percent of Europeans think the worst is yet to come in economic terms, according to figures shared by Bruton.
Politics, he said, play a major role in the huge decisions that must be made before the end of March. Germany’s first state election of 2011 will take place on February 20, followed by what is arguably the most important election of the year on March 27. “German Chancellor Angela Merkel has a tough job on her hands to sort out Europe’s banking crisis,” Bruton said.
However, a solution for Europe’s banking crisis cannot be blamed on, or solved by, a single country alone. He cited Ireland’s banking problem as one that is impossible to isolate, describing it as “a symptom of a wider European banking problem.”
“If the Irish taxpayer had not stepped in, we would have had a succession of banking collapses across Europe. Although it is easier to blame somebody somewhere else—be it the Irish or the Greeks—a solution has to be found for Europe as a whole. Individual states are not big enough to cope with this independently,” he stressed.
“A big bugbear of the European economy today is uncertainty,” continued Bruton, who took the opportunity to advocate a major one-off recapitalization of the entire European banking system. This would “take the monkey off the back of the European economy,” he said. Details of such a package should be hammered out by politicians and officials in one sitting, he went on to say, in acknowledgment that the European decision-making system has become more fragmented in recent years.
In the same vein, the recapitalization of every single bank would not be possible and some might have to be allowed to fail, Bruton admitted in response to a question from the audience. Furthermore, the European public finance problem should be a matter for each individual state.
A lot can be gleaned from the Nordic countries, he added, which demonstrate high investment in education but also have high levels of tax. With the number of working-age people in Europe set to decline between now and 2050, inward immigration could provide a potential solution.
The United States, on the other hand, could learn from Europe in its approach to tackling fiscal problems head on.
“Europe is putting money in the bank, so to speak, by facing up to fiscal problems today that will come about eventually anyway,” said Bruton, who was the former EU ambassador to the United States. “Unlike Europe, the U.S.A. is not.” He highlighted ill health as a situation that is absorbing vast quantities of resources in the United States, a state of affairs he considers “unsustainable.”
One message that can be extracted from the session is that both Europe and the United States are facing significant challenges. Bruton recommends that a comprehensive approach, which requires mutual participation, be taken to the banking problems in Europe. There are lessons to be learned from Europe’s current approach to tackling its fiscal problems, although Europe can learn a thing or two from the Americans when it comes to positive thinking.