Looking at the lessons from the European Union’s (EU) financial
woes seems timely as member-states of the Association of Southeast Asian
Nations (ASEAN) anticipate deeper regional economic integration with the ASEAN
Economy Community. As EU and Greek leaders struggle with negotiations
over finalizing Greek reforms, a seminar was organized by state think tank
Philippine Institute for Development Studies (PIDS) on April 23, featuring
Prof. Lino Briguglio of the University of Malta. Briguglio discussed the impact
of the EU debt crisis and the Greek conundrum on ASEAN regional and individual
economies.
Mr. Briguglio believes, for
the most part, that the EU crisis does not have grave implications for ASEAN
economies. The region and its member-states, according to an Asian
Development Bank paper he cited, “have the capacity to remain stable in the
event that the prolonged crisis in the Eurozone should evolve into another
global economic meltdown.”
In particular, Mr. Briguglio
is confident that the problem of slow growth, currently obstructing recovery in
Greece and in the rest of Eurozone, will not prompt a recession in the
ASEAN. Developing countries in the eastern part of the globe have shown a
“flexibility” in the capacity to implement measures to boost growth. This
flexibility is demonstrated by the debt-to-GDP ratio of ASEAN nations, which is
not as high as their EU counterparts. In case of a severe downturn in EU trade
and foreign direct investment, ASEAN nations will have the capacity to spend
for stimulus programs, says Mr. Briguglio.
But as banking and finance
industry experts in attendance shared their insights and questions in the open
forum that followed, it became clear that understanding the way the Eurozone
countries handled their finances prior to the crisis was just as important as
predicting the crisis’ direct impact.
PIDS President Gilberto
Llanto remarked that the situation seemed like an “issue about governance”—rooted
in the problems of cooperation among member-countries and implementation of
agreed rules on managing finances and ensuring Eurozone stability at the
national levels. Other participants pointed out the element of varying economic
structure among Eurozone nations, underscored by the decision in 2012 to
strengthen the European Central Bank’s regulatory powers to oversee national
budgeting, so as not to repeat the oversight over Greece’s mishandling of their
national finances. But, as noted by both Mr. Briguglio and Mr. Llanto, the
solution comes down not to the ability, but to the willingness to follow and
enforce the new rules.
Overall, these lessons prompt
Philippine and ASEAN regional leaders to consider the limitations of an
intricately economically integrated entity like the EU. It is clear that a
thorough understanding of the structure, capabilities, and competitiveness of
each ASEAN nation is important, with emphasis on promoting cooperation and
commitment to symmetrical growth and stability and to ensure that no member is
left behind. (PIDS)
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