Hard Reset – A button Europe so desperately needs

Posted on 13. January 2012

by Milan Balaban

milan-balaban2Being a machine would be a wonderful thing in this time of a crisis. Machines can be restarted easily and the reboot of their systems cleans everything so that they start fresh. Alas, we are only humans and we do not have the luxury of a fresh start everyday. Such is the case with European Union, or is it?

There are a few pillars of society that make it survive a jungle we call ‘daily life’. One of them is the economy, and that is the one which this article will focus on. Sometimes people think that “all we need is love” and that it will make the world spin the other way. Not exactly. Our forefathers gave a lot of thought to the idea of what a society needs to survive and prosper. Thus, the concept of ‘economics’ was born. It has come a long way since the “basic” idea of free markets was introduced by the grand Adam Smith. Many reforms and rules have been invented. The end result is a much more complex system. Imagine a shipyard. There are fishermen sailing around, fishing, selling the fish, and feeding their families. One day they get the idea to make a more complex ship. Some time later they build a glorious ship named Titanic. It is a wonder! It is enormous and so beautiful on the surface. Yet, it has a huge drawback. It is terribly slow.

Such is the case with the European Union. It looks like the Titanic. Unfortunately for us, it is on a collision course with an iceberg (or a few). Recession, unemployment, politics are all the icebergs in the path way of this New Titanic. Nowadays, guests and crew of the New Titanic wish they could start the journey again, fresh. It might seem to be too late to do so, yet it is most certainly not! Why is this the case?

In economics there is a phenomenon called ‘business cycle’. It is a constantly changing time of prosperity and recession (and/or depression, depending on severity). Recession and depression are corrective elements in every economy. There are so many bad credits you can give out before the market becomes flooded and “says” enough. Then, the restart time begins and we suffer. The reason for our suffering is not the lack of economic regulations but the vast number of them! It is similar to the idea of trying to control the DNA of our future children. There are just too many unknowns to be controlled which makes it impossible and bound to have very serious consequences. We are lucky that markets are much more forgiving than genetics and they balance themselves at certain points of time.

Moreover, the whole system becomes way too unstable when we observe that, at this point in time, we are paying so much money to the government (and ridiculous amounts of levels of “clerks” – for a lack of a better overall definition, while not trying to insult anyone – needed for European “democracy” to function properly). It is unsustainable and is bound to break at some point. That point is very near. If we look what is happening to the Euro/Dollar relationship we cannot be very optimistic. Add rising Euro-skepticism as the icing on the cake.

The European Union in serious trouble. If it is to survive, it must change and evolve – very fast. Improvements must be made almost overnight – quite literally. Markets need to do their business and we must accept that we have to pay for our mistakes. If markets are not allowed to restart at this point and if we continue to artificially keep them alive the European Union could reach a point of no return in the near future. Then it will be forced to start at the beginning and be rebuilt from the first brick. There are still many people who believe in the European Union. They still have dreams of a better Europe. I call that a solid foundation and see no reason to tear those dreams down. We need to build upon them and take decisive steps to sustainably grow and prosper as one Union, one Europe.