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“The European Debt Crisis: Is there Light at the End of the Tunnel?”
Opening Remarks By Dr. Norbert Eschborn Resident Representative to Korea Konrad-Adenauer-Stiftung e.V. (KAS) on the Occasion of the Lecture on “The European Debt Crisis: Is there Light at the End of the Tunnel?” The Plaza Hotel Seoul April 2, 2012


Ladies and Gentlemen,a cordial welcome to all of you today on behalf of the KonradAdenauer Foundation of Germany to our luncheon with special lectureon “The European Debt Crisis: Is there Light at the End of theTunnel?.”

I appreciate very much that you have found the time to joinus here today and I sincerely hope that you enjoyed the lunch.Seventeen years ago, in the mid-1990s, when I was working as ajunior parliamentary aide in the German national parliament,campaigns were already ongoing all over the EU in preparation of theintroduction of the single European currency.

I was in charge of preparing some of them for my party and one day picked up aprominent European speaker at Frankfurt airport to accompany himto one of our biggest events. As he was said to be one of Europe’smost highly respected economists, I used the chance during our ride to ask for his opinion on the Euro. He said only so much: “This may be the best thing for our continent for a long time.” I would not haveimagined on that day that this gentleman would once come into a position to handle the current crisis for his own county, Italy. It was Mario Monti, at that time the EU’s commissioner for the internalmarket and taxation.

First Greece, then Ireland, Italy, Spain and Portugal: The European common currency has come under pressure from large national debtsand the effects of the global financial crisis, ultimately requiring arescue package close to a trillion Euros.As we are all aware the European sovereign debt crisis is an ongoing financial crisis that has made it difficult or impossible for some countries in the euro area to re-finance their government debtwithout the assistance of third parties.While sovereign debt has risen substantially in only a few eurozonecountries, it has become a perceived problem for the area as a whole.

Nevertheless, the European currency has remained more or lessstable. At times during the crisis, the euro was even trading slightly higher against the bloc's major trading partners than at the beginning of the crisis. The three countries most affected, Greece, Ireland and Portugal, collectively account for six percent of the eurozone's grossdomestic product. I am not a trained economist.

However, I understandthat the European sovereign debt crisis has resulted from a combination ofcomplex factors, including the globalization of finance; easy credit conditions during the 2002–2008 period that encouraged high-risklending and borrowing practices; international trade imbalances; real-estate bubbles that have since burst; slow economic growth in 2008 and thereafter; fiscal policy choices related to government revenues and expenses, particularlyhigh entitlement spending; and approaches used by nations to bail out troubled banking industriesand private bondholders, assuming private debt burdens orsocializing losses. As Konrad Adenauer Foundation is one out of six so called “political foundations” of Germany, we are understandably very much interested in the political implications of this crisis, resulting inenormous political fallout, because handling of the ongoing crisis has led to the premature end of a number of European nationalgovernments and impacted the outcome of many elections:

•Finland: The approach to the bailout and the European FinancialStability Facility dominated the April 2011 election debate and formation of the subsequent government.

•Greece: The crisis led to the popularity of the then Prime MinisterPapandreou's PASOK party dropped from 42.5% in 2010 to as low as 7% in some polls in 2012 and to PASOK losing its parliamentarymajority.

•Ireland: In return for its support for the IMF bailout andconsequent austerity budget, the junior party in the coalitiongovernment, the Green Party set a time-limit on its support for the Cowen Government which set the path to early elections in Feb 2011.

•Italy: Following market pressure on government bond prices inresponse to concerns about levels of debt, the Government of Silvio Berlusconi lost its majority, resigned and was replaced bythe Government of Mario Monti.

•Portugal: Following the failure of parliament to adopt the government austerity measures, Prime Minister José Sócrates and his government resigned, bringing about early elections in June2011. •Slovakia: In return for the approval of the EFSF by her coalitionpartners, Prime Minister Iveta Radičová had to concede early elections in March 2012 which were won by the opposition SocialDemocrats. •Slovenia: Following the failure of referendums on measures tocombat the economic crisis and the departure of coalition partners, the government lost a motion of confidence and a new Prime Minister was elected.•Spain: Following the failure of the Spanish government to handlethe economic situation and the conservative Mariano Rajoy became the new Prime Minister. Be that all as it may, Asia has been observing the European debtcrisis with growing concerns. Like all other observers, questions have been raised whether there are sustainable solutions and what are thelong-term economic perspectives of the EU and the Euro zone? I am very happy that Dr. Werner Becker is here today to provide uswith information and analysis on this question. As I mentioned already in our invitation for this lecture, Dr. Becker’s professional life has in many ways been closely connected with the Euro. Besides being a trained economist and a member of Deutsche Bank Research for many years, his employer put him in charge regarding theintroduction of the single European currency for Deutsche Bank in the 1990s. He has researched and published numerous pieces onquestions such as the currency union and European integration.

Nowadays he shares his knowledge, experience and wisdom withstudents as a professor at the renowned Frankfurt School of Finance and Management. And, least I forget, although we haven’t known each other until now, both of us are coming from the same hometown which is the wonderful city of Mainz on the river Rhine. I would like to also thank on this occasion Mr. Johannes Regenbrecht, minister counselor at the German embassy, for his idea for today’slecture. The Konrad Adenauer Foundation is very grateful for ourproductive cooperation with the embassy and all their staff.

Now, ladies and gentlemen, enlightenment on the European debt crisis is near, and I am optimistic that, eventually, after Dr. Becker’slecture, we will indeed see the light at the end of the tunnel.




 

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