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The Nature of the Crisis: Europe and the United States
Srishti Pravin Aggarwal
La Pietra Dialogues
May 10, 2012


“Lets not pretend that things will change if they stay the same… for it is in crisis that inventions are born, as well as strategies and discoveries.” The latest edition of La Pietra Dialogues opened with a quote from Albert Einstein, set against the backdrop of the financial crisis that began in 2008 but one that continues to make itself felt four years later. Europe, especially, is struggling to answer some of the toughest questions it has ever faced. Is this the end of the euro? Is it the end of capitalism? Is it the end of globalisation? These questions and many more were discussed over the course of a fascinating first day, as the scholars assembled in the room agreed that they had a responsibility to help provide the answers now that banks and politicians had failed.

The first panel The Nature of the Crisis was chaired by Josep Borrell Fontelles, President of the EUI, accompanied by presentations from Loukas Tsoukalis of the Hellenic Foundation for European & Foreign Policy and William Pfaff, noted journalist and author.

Fontelles’ introduction began on a grim note, as he stated that the crisis is now systemic, and one that is becoming dangerous for democracy in Europe. He stressed the importance of understanding the difference in the challenges faced by America and the EU, and the fact that the ECB is in charge of a much more politically and socially diverse territory than the Federal Reserve. Loukas Tsoukalis agreed with this analysis, arguing that the U.S. has stronger governing institutions than the EU and that Europe’s current approach of fighting the crisis with austerity measures was a risky one: if everyone deleverages at the same time, there is a risk of turning the therapy into medicine that kills the patient.

Still, Tsoukalis believed that we “ain’t seen nothing yet”, and while this is not the end of capitalism, it definitely signals the end of reckless ‘casino capitalism’ and consequently a de-globalisation of the banking system. He was not as optimistic about the Euro however he thinks that it can and must be saved, because the cost of failure is too high. More than anything Tsoukalis spoke of his conviction that this is the end of an era, for the balance of power is now tilted eastwards.

The political commentator William Pfaff made some interesting, and equally pessimistic observations: he does not think this crisis is simply a discrete moment in the history of Western civilization, rather it is a deeper malaise that is settling in without any real steps being taken to prevent it. He spoke of the “moral crisis” in the United States, as capitalism has been allowed to grow unchecked and American militarism has reached unprecedented levels. It was interesting to see that both men, Tsoukalis and Pfaff, thought the grass was greener on the other side of the Atlantic, and this was the tone generally struck throughout the first session.

Some interesting points also emerged out of the ensuing discussion – namely that Germany is not blameless in this situation, for it was German channelling of cheap money into Spain that sparked the debt crisis there. Another point made was the fact that not all of Europe has suffered to the same extent, it is mainly the pension states such as Italy and Greece that have had the worst time, as opposed to the social welfare-based Scandinavian countries. It was a session that apportioned blame and identified problems, setting the stage for the rest of the day.

 
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