SAARC and EU: Some comparisons
While the present mess in Europe leads to some quite depressing conclusions, one feels that we in SAARC (South Asian Association for Regional Cooperation) have many mutual areas of understanding with the EU (European Union) from which we can learn. Importantly, one hopes that the Indo-Pak can learn from some basic mistakes of the EU that are now causing serious problems for its member countries. What we primarily see is that as a Union or as a Regional Cooperative Bloc, the European Union failed to address the major concerns of smaller and less developed economies towards bridging the gaps in socio-economic conditions, infrastructure and traditional cultural differences, while blindly moving forward with its monetary and financial cooperation. SAARC, which still functions as a much loosely tied cooperation in comparison to the rather too strong a bonding of the EU, fortunately has a chance to move forward and consolidate step by step. However, to achieve this in our case the larger player India needs to play the same role as Germany in Europe (willing to compromise, share and resolve historical irritants), and hopefully with a better balance!
The basic problem of Europe is that the Euro is purely an artificial financial construction with a huge cultural and socio-discrepancy between Europe’s North and South. Germany plays the major part in maintaining the balance and the Germans now feel trapped, as they reckon that a way out (back to the German Mark) would for them be an economical suicide, i.e. it would kill the German export industry. A temporary suspension of Greece, Ireland and Portugal memberships is not compatible with the EU’s Constitution and the Union in its present situation can ill afford to provide a safety belt for Spain and Italy, if they also eventually come forward to seek bailouts. SAARC to date has no such issues.
Another fundamental problem of the West (Europe and USA) is that it has developed two different economic cultures: Real economy and a deception-speculation culture. For the real economy it has stringent and binding regulations. On the other hand, nobody really understands the new instruments of the financial industry (Banking and Insurance). BIZ calculated a daily currency trading volume of $4,000 billion! The destruction potential of those speculations is overshooting dramatically any imaginable loss of the real economy (Lehman and Madoff!). Kickbacks, retrocessions and disclaimers are still legal and shareholders have a comfortable safety belt knowing that system relevant banks are too big to fail.