Chris Patten started his presentation by pointing out the sheer size of the EU economy. It is the largest economy in the world, larger than the US and accounts for 22% of global economic activity. He said, “things have to change to remain the same” which captures Europe’s problems. Its population has begun to fall, its share of global production has already begun to lag and its population is aging rapidly. Relative to the US, for example, it is grossly under investing in the knowledge economy, at half the rate the US does. He concluded that much must change for Europe to maintain its status.
Following Lord Patten’s lead-in, Jacques Attali made many interesting observations. As he was one of the original architects of the EU, his commentary carries a lot of weight. He noted that, at the conception point of the EU, the architects knew they could not create what was ultimately needed because it was politically unacceptable. Instead the leading member countries, namely Germany and France, have used periodic crises to advance the European Union to its ultimate state.
The current crisis is an opportunity to do that. The final state would be a central government with the autonomous fiscal power of taxation and spending–a condition that a later speaker, Nobel Laureate, Joseph Stiglitz, indicated was the final piece to make Europe an optimum currency area as defined by Canadian economics Nobel Laureate, Robert Mundell. The political rub is whether the member states could give up their autonomy to the greater good?
Attali was suggesting that this crisis was another opportunity to advance the cause, though he declined to say whether it would be successful. Sounding a hopeful note, he remarked the EU is now so entwined that path of least resistance is to integrate further. Germany he pointed out is well along the way of accepting this idea.
Agreeing with Patten’s comments, Attali said that OECD member countries can no longer rely on debt driven economies to grow. Patten asked Attali if Europe was likely to try to inflate their way out of the mess. In response he made this very noteworthy point–“yes that has been a solution governments have successfully used in the past, but today the problem is actually creating inflation! Furthermore the demographics of Europe with its ever increasing elderly population is dead against inflation.
More to come….