The Euro Crisis Continues – What’s at Stake for Europe & America?

Date : Mar 11, 2015
Time : 6:30PM To 8:00PM
Place : UCDC, 1608 Rhode Island Avenue NW, Washington, DC


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Michael Maibach discussed the continuing Euro crisis and what is at stake for Europe and the United States at a World Affairs Council – Washington, DC Distinguished Speaker Series event. Maibach is a Senior Fellow at the Aspen Institute’s Manufacturing and Society in the 21st Century program, which examines the relationship between the economic models in Europe and Asia in regards to increasing industrialization.  Prior to the Aspen Institute, Mr. Maibach was president and CEO of the European-American Business Council (2003-2012). The EABC, now known as the Trans-Atlantic Business Council, aims to create relationships between large corporations, both American and European, to advocate for a barrier-free transatlantic market.

Mr. Maibach began his presentation with a brief historical overview of the Euro-zone crisis, now in its sixth year. He stated that the crisis is not just a sovereign debt crisis, but it is also a crisis of competition and demographics within the European Union.  He underlined that the ongoing purpose of the Euro was peace and greater unity between the European nations following World War II. 

He then explained the consequences of the currency union and how it contributed to the euro-crisis. It has proven difficult to implement growth based free market trade as changes to the currency and trade regulations must be passed through 19 separate parliaments, causing the Euro economy to be less competitive than hoped. Additionally, when the Euro merged economies it incorporated nations with radically different competitive and business cycles.  As in Japan, Europe is in a severe demographic crisis with a birth-rate of 1.5% which causes European social welfare programs to become unsustainable. He noted that as weaknesses were exposed a dependency mindset emerged; the northern nations would not allow the southern nations to fail. Mr. Maibach noted that between 1965 and 2015 government spending in the Euro-zone increased from 25% to 50% while GDP growth decreased from 5.5% to 1%. By 2015 the differences between northern and southern economies have become blatantly obvious.

Once he presented the various challenges faces the Euro-zone Mr. Maibach outlined the recommended changes that the EU could embrace.  He recommended the two stage-stage Euro, where northern economies and southern economies would separate, allowing the southern Euro to inflate and alleviate debt.  Europe will have to revalue its current social welfare programs – Europeans will have to work longer hours and more years to support the pension system, healthcare prices need to be affixed, and welfare cut-back. Mr. Maibach advised that flexible labor laws must be implemented and protective subsidies dropped; the ECB needs to continue structural changes to fully complete the single market, while European Governments need to cut back in size.  Michael Maibach concluded his presentation on that Europe has always been forged by crisis, and that in order maintain the way things are somethings need to change.

Check out photos from the event on Facebook. Watch the full episode of World Affairs Today here.

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