‘The Day After’

Is this a happy ending or “The Day After”? We all remember that “horror” movie. The day after a worldwide nuclear war only a handful of people were left alive trying to survive among the streets of wrecked cities. Will it be the situation in many European countries after the recent summit? Or will it be a happy ending to all the fruitless struggles among eurozone leaders to save both the euro and the European economy?

For pessimists, the last-minute agreement was not enough to save the European economy. On the contrary, the rift between the United Kingdom and the leading countries on the continent made the agreement an empty and worthless document. In addition, the decision made by certain other leaders to bring the agreement to their parliaments for approval seems like only an excuse.

However, for others, the agreement is both a happy ending and a merry beginning as it brings fiscal discipline, including penalties for big spenders. It means later on, any country which has deficit and debt over the decided limits will be punished and get no help.

There is an old saying in Turkish. It can be translated as “after the destruction of Basra…’’ It has no connection to the recent Iraq War but means if a big disaster cannot be prevented, to punish those responsible after serious damage is done would be meaningless. 

It can be translated in the modern sense: This agreement is neither realistic nor practical if some countries do not obey the rules and again have deficits and debts over the new limits imposed by the agreement. What is the use of punishing them after they harm their country and the whole of the European, and possibly the world, economy?

It must be accepted the most serious problem the world economy faces is the unknown future of the euro. Almost everybody knows, to rescue this recently invented international money it is necessary first to rescue Europe’s ailing economies. Now, after the recent summit, it seems greater action is needed than imposing disciplinary rules to combat recession. Another important point is the people’s reaction to austerity measures. This may hamper the governments’ efforts to balance budget deficits and to control debts. Governments might consider punishment by Brussels better than being punished by their people. But then who will rescue the euro and Europe, and how?

Only two important leaders, German Chancellor Angela Merkel and French President Nicolas Sarkozy, declared themselves satisfied with the results. Nevertheless, the markets’ reactions have shown investors were not yet satisfied. Naturally they will first wait for approval or ratification of the agreement. Whatever you say, according to some parliaments mentioned above they will want to see initial implementation results.

Twenty-three nations in Europe agreed to obey the rules, including fiscal discipline and penalties. They also agreed to increase financial resources to help economies in the region. Two questions remain: First, if some of these 23 countries also become needy tomorrow, what will happen? Second, is there really enough in the total financial fund to save the ailing economies during a reasonable time period even if governments in those countries are sincere in their efforts to restore their national economies?

If there are no definite answers to these questions, the coming year might resemble the years between 1929 and the beginning of World War II. This does not mean, of course, a new war is necessary to stop a probable recession as some conspiracy theory writers suggest. However, it means the miserable years might be longer than expected.