Europe's three-dimensional crisis
In the rush to define Europe's problems as fiscal, our deep-seated banking and competitiveness problems have been largely ignored.
In the search for a simple, one-dimensional answer – austerity and, if that fails, more austerity – to what is a three-dimensional crisis, Europe's leaders are failing to grasp the profound historical forces now reshaping Europe's role in the world. For without complimentary action reshaping our financial sector to serve the wider economy and reigniting growth, no amount of public spending cuts and no number of rigid fiscal rules will prevent a lost decade of high unemployment and long-term decline.
Liquidity support from the European Central Bank (ECB) is welcome, but it is a temporary palliative and not a long-term solution. Already in 2012 a new wave of bank deleveraging is liquidating large numbers of companies and jobs and depriving the world of the finance that makes trade continue to flow.
There is, at least, now a dawning recognition that Europe is facing more than a short-term fall. Instead, a great global restructuring is happening before our very eyes and Europe's stagnating economy is in the throes of the transition from our 20th-century western-dominated economy to an Asian-led world. Once Europe was responsible for 40% of the world's output; already it is down below 20%. Within a decade – if we do nothing – it will be little more than half that, 11%. We are, in fact, at the sharp (and currently losing) end of huge historical processes moving production investment and trade from the continent of the first industrial revolution to the new Asia. And the jury is still out on whether Europe will face absolute – and not just relative – decline and whether today's crisis is, in effect, writing its own penultimate chapter in a story that will be entitled "the decline of the west".
http://www.guardian.co.uk/commentisfree/2012/jan/26/europe-three-dimensional-crisis-gordon-brown