Thursday, July 7, 2011

"Europe needs the solidarity of self-interest"

I like today's comment in the FT by Poland's Minister of Finance Jacek Rostowski on "Europe needs the solidarity of self-interest".

He argues for (i) lower interest rates on the EU support facilities for Greece, Portugal and Ireland to ensure that they have a fighting chance of growing out of the crisis (although less so for Greece), (ii) voluntary debt restructuring and Brady bonds (for Greece) and (iii) structural reforms.

All quite sensible and a nice article overall (am wondering however why it has not been published on the main op-ed page rather than as a comment: isn't a text by the EU Presidency's minister of finance on the euro zone problems more important than, for instance, a large text on the US defense spending on the op-ed page? I seriously question FT's priorities here).

As to structural reforms, these are crucial in the long-term: aside from every more stringent austerity packages, struggling euro zone countries need to convince investors that they can start growing again. This requires far-reaching educational reforms, liquidition of domestic product and service market monopolies, higher supply of labor etc. Some reforms will take time, some others--like raising the retirement age or opening domestic markets to competition--could be implemented quite quickly.

One thing is for sure: Time is not on our side and we need to move quickly.

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