Taking on Europe's Challenges

29/06/2012

The high levels of uncertainty that continue to plague the euro zone stem from Europe's inability to take any important economic actios until 2010, according to IESE Prof. Eduardo Martínez-Abascal

In two separate sessions with IESE alumni in Santiago de Chile and Sao Paulo this week, Prof. Martínez-Abascal described problems currently faced by Europe and "numbers to understand the mess." 

The EU's failure to act was due to complex governmental structures; the fact that national interests prevail in times of crisis; and politicians' lack of economic expertise and inability to explain decisions to the public, he said. 

In contrast to Europe, the U.S. injected funds into the economy much sooner, in 2008, and part of these funds have already been recovered. As a result, the U.S. economy grew 3 percent in 2010. 

Europe, meanwhile, responded much slower, mainly taking national measures to rescue domestic banks, then later bailing out Greece, Ireland, Portugal and Spain. Isolated actions such as these "don't tackle the heart fo the problem," he said, which are rooted in Europe's lack of growth and political unity. 

Europe, he said, should do what the U.S. did in 2008 and 2009. Europe's leaders should seek to control markets, inject liquidity into the economy and implement solutions for the banking crisis.