Is there light at the end of the tunnel for Europe? The latest economic figures suggest the eurozone has finally emerged from its 18-month recession. Could these be the first signs of a tentative recovery? The Greek Prime Minister, Antonis Samaras, insisted earlier this week that the worst of the crisis was almost over for his country. He joins a growing chorus of optimism alongside French President François Hollande, who declared earlier this year: “The crisis in the eurozone is over”.
Despite some positive indicators, however, there is still good reason to be cautious. In his State of the Union address yesterday, European Commission President José Manuel Barroso made it clear he believes the crisis is still ongoing, and he still drew criticism from MEPs for being overly-optimistic.
During his speech, Barroso argued that things can never go back to the way they were pre-2008, before the recession hit. He believes the global economic and political order is changing, as is Europe’s place within it:
Some people believe that after this everything will go back to the way it was before. They are wrong. We will not go back to the ‘old’ normal; we have to shape a ‘new’ normal.
In general, our commenters on Debating Europe seem much less optimistic about the prospects of recovery. In our recent debate on youth unemployment, Samo left a comment suggesting he felt the economy would only start to recover “five years from now”, and he worried this would leave a “lost generation” of unemployable young people who were too inexperienced (and over-educated) to find work.
Yesterday, we spoke to Nikos Chrysoloras, EU correspondent in Brussels for the Greek newspaper Kathimerini. We asked him if it was too early to declare the crisis over:
The crisis does seem to be bottoming out, at least in many European countries. But Barroso was right in saying in his State of the Union speech that this was not a cyclical but a structural crisis, and it has been made dramatically clear the limits of our credit-based growth model.
The fact is that we used borrowed money to compensate for losses in productivity, creativity and innovation in Europe. In the case of Greece, it was the state that was borrowing to fuel growth, but in the rest of Europe – in Ireland, or Spain, for example – it was the private sector. In this way, we gradually buried ourselves under a mountain of debt.
So, there are deeper reasons that caused the crisis, and a slower pace of fiscal consolidation, lower interest rates, or using monetary means to solve the crisis will not do the trick. The real problem for Europe is our aging population; our limited access to natural resources; our energy dependency on Russia; our inability to project power on a global scale; the fact that Europe is a laggard in terms of research and development, even compared with emerging economies; the poor performance of European universities compared to American universities. And if you don’t cure the roots of this disease, any recovery fueled via monetary means or expansionary fiscal policies will be short-lived and doomed to failure.
So, I think it’s too early to say the crisis is behind us. We still need to address the roots of our crisis so we can find a way to protect our unique social model. And the only way to protect this unique social model is to produce enough wealth to do so.