There are many reasons to be hopeful about the world, even the economy, and especially that of Europe. And I write this as an American who believes we actually can learn something from what is going in the EU. One of the reasons I respect the process of the economic integration (and slower social integration, but it will come) of Europe is that it is here for the first and only time I have ever heard a banker say that we must have "a redistribution of wealth." Is Jamie Dimon going to say that to Occupy Wall Street anytime soon? I don't think so. And herein lies the problem with Wall Street, unlike continental Europe (sorry but the UK and Cameron blew it last week by voting against the EU's best interests to protect the City) they do not see themselves as "of the people," but somehow removed from the rest of us.
This same banker repeated that we must not continue to allow money to be kept off-shore in tax havens. There was a real sense that Europe would go after this potential revenue. One of the primary reasons Greece will not be able to easily get back on its feet is not because there are no wealthy Greeks but because nearly all of that wealth is kept off-shore.
Last weekend I attended a fascinating conference, and surely one of the most uplifting, where our common future is concerned. It was here in Vienna that I heard a banker say those words, "redistribution of wealth" and actually mean it. It was a very practical, sane kind of conference, less rushed and more in-depth than many other conferences of its kind. The topics ranged from the Arab Spring, to the future of alternative energy, global governance and the environment, and corporate responsibility, but began with the economy, the Eurozone and the future of the Euro as a currency. With many participants flying in directly from the EU meetings in Brussels (the right hand of the ECB's Mario Draghi, Peter Praet, answered questions and gave some very uplifting answers, while remaining very realistic about how hard it would be), the banks in Frankfurt, and the bastions of upheaval such as Cairo, the event centered on extremely urgent and timely topics, without feeling pressured, thus not allowing fear to be the focus.
Experts included heads of state, potential future heads of state, leaders in the areas of clean energy and traditional energy, present and former ministers and diplomats, and non-governmental organizations alongside leading academics. What I found to be the most important aspect of the conference was the very human nature of the interactions, the questions, the approachability of those who knew they are key players in the world today, and yet spoke about solidarity between people and hope for the future.
The World Policy Conference (website: www.worldpolicyconference.com) was founded by a the multi-talented and very solution-oriented Frenchman, Thierry de Montbrial, who seems to have the knack for bringing together an innovative, thoughtful and diverse group of people and helps to communicate messages which offer concrete solutions for what are sadly often media-driven creations based on insecurity and rumor. We need this kind of slowing down and sanity brought back to the table as markets are driven so much by rumor and even manipulation that a great deal of trust has eroded. The answer is not to horde and close off from the world, but rather to open up even more, integrate even more, get to know one another even better. This is the message I brought away with me from Vienna.
The WPC is in its fourth year as a platform for intelligent conversations and information on global governance in an ever-changing world. The undeniable fact that we will not be able to go back to a pre-globalized existence, nor would it be in our best interests to turn in on ourselves, in times of crisis and upheaval, risking the rise of nationalistic border-controlling states, forces us to be optimistic. This is especially true in Europe. There are win-win situations, even in times of crisis, and as has been stated many times before, crisis also brings opportunities. What stood out about this conference was that the answers did not lie in billionaires generously donating their wealth to try to solve problems, but representatives of the people, their institutions, as well as NGOs, the finance sector and academia, putting an approach to the common good first. It felt like the future was shared, as opposed to being decided by those with the deepest pockets.
Finally I was able to sit back and listen to what sounded like sane voices sincerely discussing how we as human beings can move ahead and tackle the world's problems, and also share in the win-win kinds of solutions that do not solely focus on competition, winning in the short-term, but taking the time and putting in place the measures needed to created a more resilient future.
One extremely sane, almost professorial European voice repeated, "We need time and interim measures." Time to consolidate budgets and undergo reforms. The confidence that any restructuring needed could occur as long as they could refinance at acceptable rates. The only lack of optimism was for Greece. But even Greece was to be kept within the fold. Europe has begun a process of integration which will not be stopped, unless one openly admits that we are "at war" and attacks are taking place to keep this integration from happening on its own timeline.
The speech given at the dinner the first evening of the conference by that very sane, professorial Herbert Stepic, the CEO of Raiffeisen Bank International, was one of the best I have heard, as well as being practical, coming from someone inside the banking sector. Unlike the bankers in the US who called for emergency stress-filled meetings which resulted in decisions allowing hundreds of billions of tax-payer dollars to be eaten up by banks, because of their less than sane practices, this was about slowing down and facing reality. It takes time to integrate and change and evolve and progress. It cannot be done well if done out of fear alone. Bad decisions come that way. Yet, it is this same fear, the same "crisis" that, if allowed to by the outside, will move Europe forward, helping it to integrate in a stronger way. But it must not be rushed.
This is the first and only time I have ever heard a banker say that the reality is that we must have "a redistribution of wealth." And I realized that if a banker could be saying this, the message had hit home, whereas in the US, with now hundreds of Occupy movements protesting, and the London City Occupy movement well entrenched for the winter, the message had not reached the ears of those who are actually creating a huge part of the crisis, the bankers themselves. This is because in the US, there is not a feeling of a win-win situation as Mr. Stepic stated, should be our end goal. Europeans remember what happened in the past and they do not want to see that repeated. Thus we in the US must also remain optimistic for Europe.
It seems that on Wall Street and in the City, they are focused on a win for the financial system alone not caring it is means a loss for most of the rest of us. There is no solidarity between the bankers and the people, the 99%. In Europe, there is more of this, with exception of in the UK, which was demonstrated last week by Cameron's apocalyptic decision to go against the solidarity of Europe to protect the City, a decision which every person I have spoken to living and owning a company in the UK has told me is a huge mistake.
Granted, Mr. Stepic's bank is extremely exposed to Eastern European countries, and thus he must be optimistic about integration but he is also very realistic in that all but Hungary have both been growing and have less debt than Europe, which has much less debt than the US, UK and Japan. This is the reality. Yet these same Eastern European countries, potentially future strong members and motors of EU economy, are and will have their credit cut back as banks such as Raiffesen will have to slow lending or even stop it completely in order to strengthen their balance sheets due to the new Basel III requirements. Stepic argues that Eastern European countries for the most part are much stronger than they were to the time pre-Lehman and their credit repayment schedules are longer and depend less on cross border financing. These countries are very competitive, and have a well-educated workforce. Central and Eastern European markets are less indebted with the exception of Hungary with less than 50% of the average indebtedness of EU countries. Looking at Central and Eastern Europe, one sees the inherent conversion process of where Europe is heading.
As Stepic argues, "If you are still living as a young man of 26 years with your parents and your grandparents in an apartment of 65 square meters you really want to have your own flat. And this is the inherent motor of conversion. You want to have it. You want to see it. You want to make it. And they have the brain to do it."
Central and Eastern Europe are acting as a strong part of the motor for the future of Europe. Strategic growth is only possible through solidarity. Otherwise there will be social unrest and he goes on to actually say the only way to be realistic about the future of the EU is "a redistribution of wealth." It is not by cutting off loans to parts of Europe that are experiencing bursts of growth. I also spoke this past weekend to a Frenchman who works throughout Central and Eastern Europe who echoed the fact that cutting off lending to these countries was catastrophic, and that many of the banks lending there have been told they must stop lending to meet Basel III requirements. This is pure economic insanity.
"Pan-European solidarity, and in a second step, increased European integration is the only way to avoid a lose-lose situation and to reach a win-win situation out of the current crisis for all involved parties."
"First a breakup of the Eurozone or the bankruptcy of large Eurozone members is extremely costly for everybody and therefore very unlikely. Second, we have the means to fight the crisis, but we have just to use those means. Consequently I have little doubts that politicians will continue to go for a win-win situation of stronger integration and solidarity. So far so good. But (pause) but...all reforms requested singularly concentrate on cost savings but, Ladies and Gentlemen, Europe needs both. Europe needs budget consolidation mainly via structural reforms as well as growth. We need to create jobs and provide future oriented programs as social unrest is the biggest threat in case of rising unemployment and ever enlarging social differences. This also means that any EU governance reforms such as the proposed financial union has to take cyclicality into account and avoid pro-cyclical measures and this is what I don't see so far".
He repeats that Europe needs time and does not need to be forced too quickly because of a post-Lehman fears into targets which must be reached in only 9 months, this in the middle of a debt crisis is counter productive because banks are forced to reduce lending. This will lead to a deleveraging effect up to 2.5 trillion euros during the next 18 months and will have a long term effect on the development of Europe. He adds that the core of the problem is the mistrust of the problems and the indebtedness of a country and the key problem is liquidity and only secondly, capital. Banks go bankrupt not because they do not have enough capital because not enough liquidity. We also know this to be the case as French banks are downgraded, yet they actually have the capital, simply not the liquidity.
"The Eurozone has a relatively low debt level compared to the US and Japan. The budget deficit is 4.1% of GDP in Eurozone v. 9.3% in the US and 10.3% in Japan. And finally when talking about the current EU account deficit-0.8% and comparing it to UK with -2.5 %and US with -2.1%. Also the fundamentals of the Euro is not so bad if I compare it with other currencies."
"Will the Euro hold?"
"Hold against what or lose value against what?"
I ask you to listen to his entire speech here.
The United States, and in fact, the rest of the world, especially the fear-driven crisis-mongering media and markets, could learn a few things by slowing down, realizing it takes time to build healthy economies, especially such a new one as the European Union. I write this as someone who wishes my country would take a wiser path and indeed "redistribute the wealth". It was taken from us, often in ways which hurt the integration of our own country and its people and we want and need it back. Europe may be providing some solutions, if the craziness of the markets and the regulators let them.
Please visit my website for the teaser for the documentary "Financial Fascism: Who Wins and Who Loses in the Economic War": www.vigilante-vnm.com and follow me on Twitter: vivigive
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