Mr Petr Blizkovsky, Prof Ramkishen Rajan, Prof Richard Higgott,Dr Paul Gillespie, Dr Peng Dajin
22 Nov 2011
Grand Park City Hall Hotel, Level 2, Ballroom 2 10 Coleman Street Singapore 179809
The EU Centre held a public panel which concluded the two-day workshop Leadership, Decision-Making and Governance in the EU and East Asia: Crisis and Post-Crisis, organised in partnership with the Centre for European Studies, Chulalongkorn University and Chula Global Network.
Mr Petr Blizkovsky (EU Fellow, Lee Kuan Yew School of Public Policy) focused on the European reaction to the debt crisis and its implications, and the role the EU can play in a global institutional framework. The EU, with its system of voluntary shared sovereignty, faces implementation problems, due to insufficient coordination. He explained the architecture of economic governance in the EU (the legislative measures to ensure discipline, and the political instruments used – namely the Lisbon Strategy and the Euro Pact Plus/Euro 2020), macro-economic coordination in the eurozone and its changes over the years, and the deficiencies in the operation of the system that have contributed to the crisis. He also spoke about the new areas of governance and new facilities such as theEuropean Financial Stability Facility (EFSF).
For him, the crisis is an alarm signal indicating that stronger economic coordination is necessary. To overcome the crisis, policies agreed upon must be swiftly implemented. Once the political will is there, the EU will emerge out of the crisis stronger with deeper political integration.
Prof Ramkishen Rajan (George Mason University) focused on the impact of the crisis in Asia in the short- and long-term. He covered in great detail the economic impact of the eurozone crisis on Asia, and compared the economic/fiscal arrangements in Asia and the EU. He revisited the Asian financial crisis of 1997-8 to examine how Asia recovered, how it has learnt from that episode and how this is helping the region weather the current crisis better.
On the EU, he about the current account deficits in crisis countries, the external liabilities in foreign denominations, fixed exchange rates, appreciating exchange rates, loss of economic competitiveness, regional contagion, the Troika’s (EU, ECB and the IMF) rescue packages and austerity measures, and how they are affecting citizens and member states. On Asia, Prof Rajan explained that its current account deficit had been caused by falling investment, whereas in the EU, there is the phenomenon of falling savings as well as falling investment. The 1997-8 crisis was more in the private sector, while the ongoing crisis in EU is one of sovereign debt. The eurozone countries cannot exercise currency depreciation to regain relative competitiveness, whereas this move helped Asia get back to capital account surpluses following its 1997-8 crisis. Instead, in the eurozone, member states have to resort to wage deflation. Lastly, the external environment should not be overlooked – the Asian financial crisis struck when the US economy was doing well.
While Asia is currently experiencing growth, if and when there is a recapitalisation in Europe, money will flow out of Asia, affecting overall market liquidity and business confidence, as the regions exports and investment are closely intertwined. In conclusion, Asia is better prepared from a structural perspective due to its experience during the 1997-8 crisis – it now has a highly disciplined fiscal policy.
Prof Richard Higgott (Murdoch University) focused on the socio-economic changes and politics in a heavily financialised environment that is dominated by capital and structured around capital flows. This has resulted in the overemphasis on development of the global economy and the relative underdevelopment of the global polity. The role of multilateral institutions and the principles and practices of international relations that have emerged in the second half of the 20th century are now being challenged. The power of market ideology – as the driver of how we govern ourselves and how we manage economic processes – is being questioned.
Two major questions face policy-makers today – how should they respond to market failure? What happened to institutions? The development of global institutions has not accompanied deregulation, the privatisation of state assets, the increased securitisation of public life and goods. In addition to the emergence of the technocratic, managerial class, there are currently deep insecurities sensed among the established powers, which have yet to forge a new equilibrium after a period of bipolarity during the Cold War. But how do they work their relations out in the new world order? The G20 summits are hailed as crisis-busters, but not seen as a good manager of the global economy over a sustained period.
Dr Paul Gillespie (University College Dublin) gave the background on Ireland and the effects of the crisis in the country, highlighting the disconnect between the political-economic elite and wider public. Bottom-up politics is necessary, and is most important with regard to the integration of citizens. There is a need for a creation of a common sphere of politics at the Irish and European level which involves the citizenry as well as elites.
Prof Peng Dajin (University of South Florida) offered his interpretation of China’s perception of the current crisis, emphasising the reversal of fortunes in how China is now in the position as the rescuer of the US and Europe, after having been dictated to in previous times. He was also of the opinion that China has unambiguously emerged as the regional power, having eclipsed Japan in the economic sphere. He suggested that Chinese policy makers are pragmatic and would do what they see as in the interests of the Chinese to ‘help’ Europe recover.