The road to the sound fundamentals

The European Commission’s released a package of new actions for growth, governance and stability on the 23rd of November, 2011. The new economic priorities for the next year set out in the 2012 Annual Growth Survey are underpinned by two Regulations to tighten economic and budgetary surveillance in the euro area and a Green Paper on Stability Bonds. Taking into account the European economy’s stagnation, excessive sovereign debts and rising borrowing costs those simultaneously affect financial stability of the European Union’s region, strengthening monitoring of strategic development and budget discipline is an inevitable step. However, despite of well understood and accepted fundamentals of sustainable development, the recurrence to basics is sluggish.

The AGS indicated five priorities for 2012 involve pursuing differentiated growth-friendly fiscal consolidation, restoring normal lending to the economy, promoting growth and competitiveness for today and tomorrow, tackling unemployment and social consequences of the crisis, modernising public administration. The goals for 2011 were focused on fiscal consolidation, labour market reforms and growth-enhancing measures. So, the Europe 2020 Strategy adopted by the EU leaders in 2010 which foresees the re-launch of the Single Market, Aligning the EU budget and EIB lending with the Strategy and a new trade strategy improving global market access for EU companies alongside with the Integrated Guideline which set out a framework for the strategy’s incorporation into the National Reform Programmes and introduced European Semester for economic and fiscal policy coordination, enforced the implementation of the EU’s economic policy with comprehensive assessment of macroeconomic climate, progress of structural reforms and competitiveness of the member states as well as the overall financial stability. Moreover, the Euro Plus Pact which was agreed in 2011 by euro area leaders and was joined voluntary by other 6 European Union’s states obliged countries to increase competitiveness and employment as well as to contribute further to the sustainability of public finance and financial stability.

Going back further and analysing the scope of strategic decisions in the EU it could be mentioned the Stability and Growth Pact adapted in 1997 and aimed to ensure budgetary discipline as well as Lisbon Strategy for Growth and Jobs launched in 2000. The history of the EU is full of other strategic cooperation decisions with a clear evidence of great visions. However, as long as development ideas foreseen of former and current leaders are clear to themselves, do the rest of the community understand the objectives, the reasons of necessary reforms and the effective measures required to implement in order the competitiveness of the region and wealth of community were maintained in the global economy development context?

The moral hazard and the resistance to pursue consistent strategic reforms led to the following: excessive sovereign debts, downgraded credit ratings, derived mistrust in the financial markets and vulnerability of financial stability, increased borrowing costs and loss of economic competitiveness.