Ottoabasi Abasiekong: Debt Management And Economic Sustainability (15)

Portugal on the 15th of October,2012 boiled again as massive strikes, riots and protests greeted a new wave of austerity measures rolled out by the Government as a way of tackling the debt crisis issues the Iberian nation faces daily.

This is just few days after the IMF Managing Director Ms Christine Lagarde warned that too much emphasis on austerity drive by debt ridden euro nations without balanced mechanisms for growth will hurt the economic recovery.

The country is experiencing its worst recession since the 70’s, and the statement by the Finance Minister that there will be more cuts to benefits, pensions and tax increases is really unfortunate.
Germany has continued to show regional economic leadership, committing to the European Financial Stabilization Fund(EFSF) a fund platform to assist, rescue and also stabilize the economic condition of crisis-ridden member states of the ‘eurozone’.

But there is a limit to What Germany can do for the whole of Europe, and that is what leaders and policy makers must come to terms with the fact that Deutschland is no father Christmas, it is also cautious and battling to be a sustainable economy.

Greece and Spain will be the focus of an EU Brussels summit to start 18th October,2012 but Portugal could also be considered in the days to come. Italy also seems to be signalling that trying to assist or solve the Spanish pandemic without considering its financial state will be preparing for another huge debt burden as the ‘Former Roman Empire’ nation has a rising tide of public debt.
It is true that the Governments should operate a more sincere and transparent approach, wasteful spending, corruption and embezzlement of public funds will not be tolerated by citizens who have lost confidence in the leadership process in countries like Spain.

Responsibility is now the keyword that must be restored to the ‘eurozone’, and this is collective, this means before further cuts governments should come to an agreement of shared goals that drive sustainable growth beyond austerity.

One of the battlegrounds leaders can face is giving hope to hopeless citizens in the country and region. The suicide rates between 2011/2012 in Greece and Italy has been alarming, it shows a horrific twist in the fortunes of this region and offers an opportunity for it to come out from the cloud of darkness.
The challenge for Greece, Spain and Portugal is that Prime Ministers Antoni Samaras, Marian Rajoy, and Pedro Coelho keep pushing various rounds of austerity, even when they promise the citizens that they will not push it further.

Martin Wolf the Financial Times expert in a CNN World Business report interview believed that tempo of austerity is too quick to get a level of recovery and stability, he asserted that approach is not the best at the moment.
Scholars like Proffessors Joseph Stiglitz and Proffessor Nouriel Roubini have been warning that these are dicey moments for the ‘Eurozone’, and the region faces a make or break situation at the moment.

Beyond the challenge of tackling the debt crisis, the leaders in Europe are facing a deeper commitment for the future and that is the Central supervision banking policy for the entire ‘eurozone’ to take effect in 2014, will be a big cost for the whole disaster in the region.

This policy will need effective leadership to sail through and with the recent award of the 2012 Nobel Peace prize to the European Union, the capacity to replicate its ability to keep a peaceful Europe should inspire it to attain the position of becoming a viable economic zone.

As for the emerging market economies Morgan Stanley analysts believe they need to rethink export-reliant growth models and pivots to domestic drivers. This calls for innovation, creativity and ingenuity on the part of countries like India, South Korea, Brazil, China, Nigeria, South Africa, and Singapore amongst others.

Russian Finance Minister Anton Siluanov made a valid point in the last IMF summit that the it was unrealistic for emerging markets to increase their budget deficit so as to stimulate growth at a point when developed nations are experiencing debt crisis.

He believes that the rich developed nations should fix their problems from the root, which means they should go to the foundational framework of the market economic principle they operate to solve what has been a recurring crisis.

Federal Reserve Bank Chairman Ben Bernanke is an example of the discussion, who has been trying to defend his decision to implement a $40billion a month mortgage securities purchase program which may cause destabilizing flows to emerging market economies.

Though its a good plan to tackle the challenge of ‘Unemployment in the United States’, it buttresses the fact that Europe, America and Japan have what it takes to stabilize and manage their debt crisis if they are committed to it.

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