Europe doesn't just have a debt problem. It has a banking and growth problem. And leaders must recognize this as not just a Greek or Irish emergency, but a European crisis that needs cooperative, comprehensive solutions.
When the history of the 21st century is written, people will rightly ask why it was that Europe was found wanting during its most intractable economic crisis.
They will ask why Europe slept as an undercapitalized banking system floundered, unemployment remained unacceptably high, and the continent’s growth and competitiveness plummeted.
Worse still, if a reconstruction plan does not come soon, Europe’s leaders will be charged with “the decline of the West” and then face accusations for being, in the words of Winston Churchill about the 1930s, “resolved to be irresolute, adamant for drift, solid for fluidity and all-powerful for impotence.”
There is, of course, no shortage of European meetings. Hardly a day goes by without a summit of European leaders discussing the latest crisis facing a member state. But each time they talk as though they are dealing with a calamity confined to the nation in the headlines – the Greek problem, or the Irish problem, sometimes the Portuguese or the Spanish problem – without an agreement on the true nature of the emergency, which is pan-European. By wrongly analyzing Europe’s woes, they end up implementing the wrong remedies too. For Europe’s deficit crisis is a real concern but just one of its concerns.
Europe has in fact three deep-rooted problems, each of which is entwined with the other, and each of which reaches systemically into every corner of the continent. Alongside the deficit problem is also a banking problem — not confined to a handful of banks or countries — and a chronic growth problem.
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