Some blame part of the Eurozone’s woes on globalization – the interconnectedness of world economies held responsible for the downturn that’s hit so many nations in turn.
Pascal Lamy head of the World Trade Organisation joined Isabelle Kumar of euronews in Davos.
Isabelle Kumar: “Pascal Lamy, thank you very much for joining us on euronews. The eurozone crisis is being examined from every angle here, its problems blamed on a myriad of factors. You are a former European Trade Commissioner, so that’s an area you know well. Is there a clear-cut solution?
Pascal Lamy: “I’m not expecting a clear-cut solution soon. The reason for that is that it’s a very complex transformation moving from the sort of pre-crisis European arrangements to something which is a more political union, where more of national policies in fiscal, budget, economic issues, will have to be dealt with at EU level, so that there is a proper balance between solidarity and discipline.”
Isabelle Kumar: “That discipline obviously involves austerity, but when you have austerity, it seems difficult to have growth. Do you foresee austerity and growth working together?”
Pascal Lamy: “That’s the fundamental issue. There has to be a sort of fiscal rigour agenda, but there also has to be an agenda about investing in the future, about making the European economy more productive, more competitive, which has to do with a number of structural reforms in education, innovation, research, deepening the internal market in areas like services, and again, this can only be done at EU level.”
Isabelle Kumar: “Another fact that has been debated is a smaller eurozone, a eurozone, for example, without Greece. Do you think that is something that can be envisaged?”
Pascal Lamy: “I personally believe that if Greece was to leave the eurozone, the problems of Greece wouldn’t be easier to solve. I don’t believe breaking up the eurozone is a proper solution. On the contrary. I believe that strengthening euro discipline at EU level is the right way out.”
Isabelle Kumar: “Before the summit in Davos, one of the big issues, and it’s moving so quickly now, was rating agencies and their downgrade of several European countries. How credible are the rating agencies in your opinion, because they have made some colossal mistakes in the past?”
Pascal Lamy: “You’re absolutely correct. These rating agencies are sort of human organisations and human organisations sometimes make mistakes. So the question is whether these should be only market driven or whether there could or should be a sort of public system that would be better at avoiding possible conflicts of interest. I personally find it would make sense, but it would be costly. And of course, the big question is, are European taxpayers ready to fund such an organisation?”
Isabelle Kumar: “Professor Klaus Schwab, the founder of the World Economic Forum has said that, “Capitalism as we know it is no longer relevant.” Is that a fair assessment?”
Pascal Lamy: “We know that global market capitalism needs more international regulations. And for that we need a higher level of international cooperation, which unfortunately in present time is in short supply. The big problem we have at the moment is that there’s not much left in national leaders’ pockets. Their political authority has been eroded by the crisis everywhere. We need more political energy on the international scene, so that in trade, in currencies, in climate change, social issues, there is more to be done cooperatively, rather that sort of do it alone. And that is, in my view the most urgent priority.”