By: Roslyn Kunin
Any reporter knows that if you can get the answers to six questions, you have a story. The questions are Who? What? Where? When? Why? And How?
The biggest economic story that is likely to affect all parts of Canada as we move out of 2011 and into 2012 is not within Canada. Nor is it in Asia, the source of much of global economic growth. It is not in Africa which we should be starting to watch as that continent begins to exhibit growth patterns similar to those in China and India of a few decades ago.
The story concerns the very precarious financial situation in Europe and the on-going, increasingly desperate attempts to ameliorate things or at least generate enough stability to avoid conditions becoming any worse.
So far, we have answered the “what” and the “where” questions. The “when” is now. The “why” is generating growing concern among both political and business leaders and informed citizens. Failure to put Europe back on a secure financial footing could spell the end of the euro as a widespread and growing common currency. It could threaten the European common market and the resulting free trade and mobility. The simple uncertainty of the situation could generate economic retraction in Europe, which could then spread to the rest of the world.
This has led the political leaders in Europe to earnestly seek out “how” to avoid these dire consequences. Greece and Italy have positioned unelected technocrats as heads of their governments, hoping they will be able to find and implement the tough answers needed.
An almost continuous series of summit meetings has been held, featuring Nicolas Sarkozy of France and Angela Merkel of Germany, each meeting seeming to lead only to the next summit meeting. The latest meeting did result in some more specific proposals, including a tax on financial transactions.
Already Britain and others in Europe are stepping back from this potential solution. Nevertheless, the situation is serious enough that this proposal just might work. Merkel has already stated progress could be made even if not all countries choose to participate.
However, there is still one very important unanswered question. The current proposal, and indeed any solution, will involve imposing fiscal and monetary requirements on individual countries. Rules will be set and penalties specified for breaking those rules. The big remaining question is “who” will apply and enforce these rules and penalties?
Europe and the euro zone have always had rules. They were often broken. If previously established deficit limits had been adhered to, Europe would not be in its current mess. So putting in place more rules that will intrude even more deeply into national sovereignty and expecting them to work requires a leap of faith. Unless, and until, there is an agreed upon body with both power and widespread consensual support, an effective solution to the European problem will remain elusive.