Saving the euro
Page 1 of 4
Axel Merk is chief investment officer of US firm Merk Mutual Funds.
The management of the eurozone debt crisis is dysfunctional. In our assessment, to save the euro, policy makers must focus on competitiveness, common sense and communication.
If policy makers strived to achieve just one of these principles, the euro might outshine the US dollar.
Let's start with the simplest of them all - communication. In a crisis, great leaders have a no-nonsense approach to communication, providing unembellished facts, a vision, a path on how to get there, as well as progress reports.
Just as in any crisis, such a leader typically only has limited influence on the events playing out, but serves as a catalyst to rally the troops, provide optimism, avoid panics, explain sacrifices that must be taken, and show people the light at the end of the tunnel.
The eurozone needs a communicator. It can even be more than one.
The one unifying face of the eurozone is Mario Draghi, head of the European Central Bank (ECB). Better than his predecessor, Draghi is able to articulate the issues and has been lecturing political leaders on their job when it comes to, among other things, fiscal sustainability and structural reform.
Draghi has made it clear that while liquidity is abundant in the eurozone, it is rather "fragmented". As such, monetary policy is not the bottleneck. Instead, governments and regulators must live up to their duties.
However, Draghi is the first to point out that he cannot be the spokesperson for fiscal and regulatory matters.
Starting at the top, the executive branch of the European Union is the European Commission, headed by José Manuel Barroso.
Interested in the vision Europe so desperately needs? Barroso's vision should give the answers. Unfortunately, it comes across like a school essay, unlikely to go down in history as the vision that saved the European project.
Google is proof that his office must do better in communicating with the public - the commission's website ranks third in results when explicitly searching for it.
Olli Rehn, EU commissioner on monetary affairs, is the public face for the political side of the euro. While Rehn has achieved much given the limited authority he has been given, we urge him to take a bigger public profile.
In announcing the Spanish bank bailout, his office released a statement saying "that the commission is ready to proceed in close liaison with the ECB, EBA and the IMF, and to propose appropriate conditionality for the financial sector".
The statement goes on to read: "The commission is ready to proceed swiftly with the necessary assessment ..."
An action plan would have been preferred.
The EBA referenced above is the European Banking Authority, established only in 2011. The head of the EBA is Andrea Enria. Who?
If the eurozone wants to move towards a "banking union", Enria needs to work harder in becoming a household name.
As of this writing, the latest headline on the EBA's website appears ill suited for public consumption: "Consultation paper on draft implementing technical standards on supervisory reporting requirements for liquidity coverage and stable funding."