It is kind of interesting to see all the systemic problems, which financial markets claim to expose in the European structure. Sure, there might be some issues, which need to be addressed, but in principle the response of the European leaders is responsible and balanced so far. This does not mean that the pressure for further balanced responses can be taken off the table. There is a lot, that can be optimized and the continuous and coordinated efforts have to deal with these issues while markets will continue to expose further problems or weaknesses. So far, so good.
But what is really needed for the regions, which are hit hard by the austerity measures and by the financial crisis? One just has to look at the unemployment in Spain and other countries. What people really need are jobs. These are not jobs, which are provided by the government, but these are jobs, which have to come from the private sector. Sustainable development of competitive jobs. Germany has tried now for years to motivate companies to set up factories in the eastern German states and the success is not clear. But what is clear, is that without the attempts to bring industrial producers into these regions, the situation would be much worse. Therefore the plan of the French minister president to establish a European coordinator for economic development is to be lauded. There has to be a coordinated effort to bring jobs into regions with high unemployment without hitting at competitive jobs in better developed regions. This sounds like a socialist master plan, but without aiming for this goal there will potentially not much happen for years. And unemployed people cannot wait.
Where should these jobs come from? They have to come from manufacturing and resource development and from other parts of the eurozone trade balance, which are located on the import side. Only on this side of the trade balance will it be possible to generate NEW jobs in euroland, which will be sustainable. There is hope that politicians understand this task: One example is Qimonda, the insolvent German chip manufacturer. While the production facilities and the development in Germany where mostly shut down, the production facilities in Portugal are still running as a new standalone company, which appears to be good enough to perform in the global market place. Job preservation and creation has to be supported by European structural funds in regions, which are hit hard by unemployment. Usually living costs in these regions are lower, so there should be no big issue with lower wages, if required (I hope unions understand the importance!) to support global competitiveness. This will be a pulling and pushing with other global manufacturing hubs mostly in Asia, as it may seem that deflationary wages are brought to Europe. On the other hand, it is an important struggle to maintain a competitive industrial production, which forms the basis for the living standards people are used to.
Another example is renewable energy: sure, people like it for the good it does to the environment. I agree this is nice. On the other hand, people should like it much more for the good it does for industrial production of components, which in the long run support also the financial structure of the eurozone. Germany is kind of leading the way and has built up a massive industry – by the way mostly in its eastern states. So instead of planning huge power plants, like Desertec, in North Africa, one should maybe reconsider, that these plants also can be built in southern European countries, like Spain, Portugal, Greece and Italy. Sure it has to be done in a sustainable way, not harming the great tourism infrastructure. But, as not everyone can live from tourism, there need to be plans on the table to ramp up industrial facilities now! I hope politicians understand this quickly.
Disclosure: No positions