Cast your eyes north and learn how not to integrate a region
The entire Euro economy is held hostage by its smallest member, the puny state of Greece, a contributor of around 2% to the overall cake. Not only has Euroland been hijacked by its smallest member, it has lived with this malaise for the past two years. In the meantime, European equity markets hop up and down like ping pong balls whenever some official claims, a solution has been found, and hijacker responds by saying: That is not so, we first need to consult the rest of the Mafioso.
Put simply, the Greek farce is sentiment driven, and that happens to the detriment of everybody else.
It is understandable that the Greek Parliament is playing for time. It is also understandable that the Greek public keenly plays its own part in this comedy. Everybody with a whisker’s wit in that dim little republic realises the end of the road is nigh.
But the Greeks can riot in the streets, attack policemen in front of their government buildings, and opt for another replacement (interim) government, or another referendum, it does not change the statistics. Meanwhile they spook the world’s second biggest economic block, scaring all who fear for their own solvency into believing once the contagion starts, it will be the catalyst that first destroys the Euro, and then Europe.
I do not share this sentiment. I think it is nonsense, and cannot find any meaningful macro statistics that convince me chopping off 2% of Euroland will sink the entire ship. Sure, the contagion effect will be dramatic and capital markets will punish bond issuers, but within a matter of weeks, once the investors see the map of Europe stays just as it is, and Spain and Italy are still large, serious and productive economies, the bond market will adjust and re-align itself.
Actually, what happens in Europe does not keep me awake. It may sound rather insensitive but I do not give a damn if they slit each other’s throats in Europe. What I do care about is what effect this will have on the world economy, and since I also see no merit in the decoupling hypothesis, I realise what happens in Europe ripples out to the emerging economies, and what happens there, eventually affects the primary sector economies, like ourselves.
After two years of wrangling, it has become a waste of time to fret too much about Europe’s problems. And to worry too much about what it will mean for us. There is definitely the odd chance that the Euro and most of western Europe can implode, but I doubt it. I think it is best to let the Europeans worry about this, find their way out of the morass, and continue being a very significant player in the world economy. I suspect many Europeans with common sense share this view.
In the week I saw some statistics that show, contrary to some views, how very large the German, French and UK economies are. And by comparison, how small the Chinese economy still is despite all the hooha when one only considers its industrial output, isolated from all the other factors that make a big economy big.
For us in southern Africa, there is one important lesson in recent Euro history: Slow down with all this talk of a monetary union. The reigning model is that since there is already a de facto monetary union in SACU, formalising this arrangement by getting rid of smaller currencies and then exporting the concept to the rest of SADC (the non-SACU members), will enable cross-border trade and herald a new wave of prosperity.
That is indeed a grand idea, but as I have said earlier, from conceptualisation to implementation, then to ironing out the teething problems, we are probably looking at a time frame of plus-30 years. If, after many years of SADC, we scrap its single most important institution, its Tribunal when we do not agree with it, how can we ever hope to implement a workable single currency in the next half century, if the Europeans could not do it under 50 years?
Why is the Tribunal so important? Because it is the mechanism we hope to resolve disputes between member countries. It is like a high court for a higher order. Without it there is no legal recourse available for whatever dispute, and without it, integrating SADC through regional trade, is just hot air. A dead duck.
Whenever another pseudo-educated official tells us about all the fantastic benefits from a single currency, a unified and integrated trade block, and the economic growth that will spring from intra-SADC transactions, then politely ask just one question: Where is the court? We shall need it when we disagree, and disagree we will for sure.