A generation ago, the United States, Europe and Japan were the world’s powerhouses. Now, according to Eurasia Group’s Ian Bremmer, we’re living in a world where everyone – and anyone – can set the agenda. So, what does G-Zero mean for the world?
Europe’s necessary creative destruction
By Ian Bremmer
The opinions expressed are his own.
What we’re seeing in Europe — in rising Italian borrowing costs and the felling of two prime ministers — is the growing impatience of the markets for a resolution to the euro zone crisis. To put a finer point on it, the hive mind of the markets has decided it is not going to give Europe enough time to get its act together. The big institutions that drive the world’s economies are sitting on huge amounts of cash — enough to solve many of these problems overnight. But they have lost confidence in the ability of the European political system to deliver solutions that will work.
In a G-Zero world, where there is no strong global leader to direct the course of events, no one is interested in taking a flier on helping the Europeans get out of their mess. As the abortive G-20 conference showed last week, there is no backstop for any country or institution that makes an error in today’s environment, whether it’s tiny MF Global or the Chinese sovereign debt fund. In the postwar era, the Marshall Plan was the very definition of global security — it was a huge commitment by the U.S. to rebuild Europe into the economic force (and not incidentally, trading partner) that the world needed. Today, there is no Marshall plan for Europe, from within or without.
That’s the high-level view of the Europe situation. The question everyone wants answered is this: what happens next? Start with Greece: the best possible outcome for that country has happened with Papandreou’s resignation and the selection of economist Lucas Papademos as Prime Minister of an emergency government. Papademos is committed to remaining in the euro and accepting the terms of the Greek bailout package. Despite the roller coaster ride Papandreou took his country and the euro zone on, Greece has now moved closer to the Spanish and Portuguese models for avoiding the debt crisis drama. In Greece, a resolution is starting to be reached. It’s not the beginning of the end, but maybe this is the end of the beginning.
Slaughtering the PIIGS
By Ian Bremmer
The opinions expressed are his own.
Nobody likes to be called PIIGS. For years, Europe’s so-called peripheral countries — Portugal, Italy, Ireland, Greece and Spain — have complained about this acronym, but the euro zone’s sovereign debt problems have only entrenched it further. Yet, it’s time to acknowledge that the PIIGS have a point. They don’t deserve to be lumped together. Their actions and their circumstances have sharply diverged over the past three years.
Some of the PIIGS, let’s call them peripherals, have accepted the need for painful austerity measures. Spain’s government beat its deficit reduction targets last year. That’s a result that should impress outsiders, including powerhouse Germany, where lawmakers have worked hard to persuade voters that profligate countries won’t be bailed out until they have proven they can mend their spendthrift ways. Protests against the belt-tightening have been limited and surprisingly peaceful given Spain 21% unemployment rate.
The conservative People’s Party, which has already pledged its commitment to both austerity and the euro zone, looks headed for a win in Spain’s November elections. That’s in part because Socialist Prime Minister Jose Luis Zapatero has pushed hard to implement so many of the plans called for by Germany and European institutions over the objections of his party’s political base, including a plan to amend Spain’s constitution to legally require both the central government and autonomous communities to meet deficit targets that go beyond the levels set by the EU.
