China Europe International Business School, Shanghai campus -- Former Prime Minister of Belgium and current Member of the European Parliament Mr. Guy Verhofstadt today offered concrete suggestions on Europe’s global role in a post-financial-crisis era. He was speaking in front of an audience of about 200: CEIBS MBA students, members of the Belgian business community in Shanghai, a wider cross section of members from the Benelux Chamber of Commerce, and the media.
Mr. Verhofstadt’s topic, which is also the title of his latest book to be translated into Mandarin, was "Emerging From The Crisis: How Europe can save the world." This is the second of Mr. Verhofstadt’s books to be translated into Mandarin -- the first was The United States of Europe which was translated in May 2009.
Mr. Verhofstadt began his presentation with the important point that Europe does not have all the answers and that his message was, firstly, one for “the Europeans themselves”. The December 1, 2009 enactment of the Lisbon Treaty, he told the audience, was a significant step forward in better preparing the European Union for the challenges it faces as a result of the financial crisis.
He stressed however, that a lot more needs to be done. Drawing a comparison between the size of the EU’s recovery plan (1.5% of the Union’s GDP) versus that of the US (6% of America’s GDP) and China (14% of the country’s GDP) Mr. Verhofstadt called for a European social and economic government, or at least social and economic governance. “Up to now such a European social and economic governance does not exist,” he said. “If we want the Union, and at least the euro zone, to develop a genuine European social, economic and financial policy, which is absolutely needed to combat the crisis, we should do more.”
For example in his capacity as Member of the European Parliament, he added, he has been pushing for the creation of one single financial European supervisor. “But although single supervision is necessary, it is not enough,” he sad. “The present crisis is destroying large parts of our economic fabric. So we will have no option but to lay new economic foundations. But this can only happen if we implement a large-scale European action and investment plan. A recovery plan of the same magnitude of the American and Chinese plans; which is about 600 billion euro, 4.5% of the EU’s GDP.”
Other measures needed to turn the crisis into an opportunity to “implement a radical transformation of the European economy”, Mr. Verhofstadt said, include:
- rapidly evolving from a vertical society, based on centralization, synchronisation, standardisation and massification, into a horizontal society where diversification and personalisation are the norm, thereby breaking down the barriers between sectors, countries or economies;
- investing in the long term, with sustainable jobs and real purchasing power as the end result
- this long-term investment, he said, has to be based on 1) a carbon-free economy, 2) a speeding up of the implementation of the Trans-European Networks in three vital sectors: transport, telecommunications and energy, 3) investment in aging and 4) investment in IT and ICT networks.
By drawing on the example of how Japan finally emerged from its financial crisis of the 1990s, he cautioned, however, that the first step in the entire process was rescuing European banks and insurance companies. “Faltering banks have to be recapitalized. Toxic financial products have to be removed. Billions of dollars, or euros, yuans or yens are to be found to heal the wounds of the great financial crisis we all go through,” he said. “On the other hand, our financial institutions, too important to be left in their own right, must accept the new rules and standards set forward by public authorities.”
Mr. Verhofstadt suggested that Eurobonds be introduced in order to fund the rescue of the financial systems. The instruments, he explained, could either be issued by the existing European Investment Bank or a new European Investment and Stability Fund on international capital markets. These bonds, he said, would likely be attractive far outside of Europe -- in China for example where American T-bonds are popular. “I am convinced this euro bond market would be a success,” he said. “And it will be necessary as well to fund the investments we need.”
During today’s presentation, Mr. Verhofstadt drew on his years of experience in the political sphere. Trained as a lawyer, his political career spans almost 40 years. During that time, he has served in the roles of Member of Parliament, Deputy Prime Minister, Minister of State, Senator, and Prime Minister (July 1999 - March 2008). Since June 2009, he has been a Member of the European Parliament and Leader of the ALDE (Alliance of Liberals and Democrats for Europe).
After his speech, Mr. Verhofstadt fielded questions from the audience which asked for his thoughts on issues such as:
- how realistic is a carbon-free economy
- the reasons behind the slow pace of European integration
- the sustainability of the Euro zone
- and regionalism in Europe versus a more coherent policy on economic and social issues.
This evening’s event was co-organized by CEIBS and the Consulate General of the Kingdom of Belgium, with the support of the Benelux Chamber of Commerce and CEIBS corporate partner AB InBev.
