Cause and Effect in European Politics and Law

Is there a cure for World's Economy

Adelina Marini, March 18, 2009

With the summit of the G20 approaching, the attempts to find a cure of the deepening financial economic crisis increase. And if a year ago we thought that something happened with the Franco-German motor, now we can be sure that the then-new French president Nicolas Sarkozy just needed time to step on the right track. Yesterday the French president and the German chancellor Angela Merkel released a joint letter, addressed to the rest of the member states of the EU in which they call for the building of a brand new global financial architecture. This was mentioned for the first time before the summit of the G20 leaders in Washington last autumn but then no significant measures were taken. Since then the recession only becomes more severe. Al this is happening on the background of worsening IMF forecasts for the world economy and the Eurozone in particular. The revised forecasts are scaring.

In their letter the leaders of the two largest economies in Europe and co-founders of the EU - Nicolas Sarkozy and Angela Merkel, state that they are determined to concrete results on the upcoming summit in London to increase international financial regulation. The EU should propose all hedge-funds and other types of funds that are inclined to systemic risks, to become subjects of additional registration and regulation. Besides, similar idea was proposed by the ex-secretary of Treasure of the US Henry Polsen. In a detailed publication in the "Financial Times" he points out that the increase and centralisation of control over the financial institutions that can invoke systemic risk, should be a main priority. His thesis is directed mainly toward increase and centralisation of control in the US but the mechanism that he suggests is not very far from the idea of Mr. Sarkozy and Mrs. Merkel. In addition, both outlaws the countries, described as tax heavens. Germany has announced war years ago against countries like Luxembourg, Switzerland and Lichtenstein and now, although hard, the battle seems successful. For now, the UK, the US and the Netherlands defend measures that are mainly directed toward recovery of the economy and the control. This can be easily explained by the type of their economies and that is exactly the problem because many different economies are trying to find a common cure. And much sadder a fact is that this is hard for the EU itself because its main reason for existence is integration. Indeed, it is much overdue and seems more and more impossible.