Europe : Facing financial turbulence (and a return of the cloud ?)

In Rome on Tuesday I joined a TUAC delegation in consultations with the Italian Chair of this year’s OECD Ministerial Council meeting, the OECD Secretary General, and Ambassadors representing the Vice-Chairs from Australia and Norway, as well as the employers through BIAC. This was the most substantive preparation for a Council meeting involving the social partners in my memory, and for the first time TUAC and BIAC will participate throughout the Council meeting.

Italian labour union colleagues briefed us beforehand that the Italian Finance and Economy Minister, Giulio Tremonti, who will chair the Council after an opening by the Italian PM, Silvio Berlusconi, had a reputation for independence and was able to function in the government with considerable autonomy. Still, I was not really prepared for the extent to which we seemed to find common ground on analysis of the financial and economic crisis. When I commented that the global economy was like the volcano in Iceland, both containing the threat of new eruptions, I could see the point resonated. “It is like the question of whether there was a World War I and a World War II, or whether it was just one event, with the second phase caused by failure to resolve the problems arising out of the first phase” he said.

The Greek debt crisis was foremost in everyone’s mind, with the risk of “contagion” to other countries in the Eurozone, starting with Portugal and Spain. John Evans, TUAC General Secretary, urged the OECD to be more upfront on the Eurozone crisis, as we pressed the point that “back to business as usual” would just set the scene for the next eruption. (see 5 February entry for my comments on the emerging crisis in Greece, Spain, Portugal and Ireland).

It is not so often that as EI we get to meet with Finance Ministers – in our case it is more likely to be Education, or Employment and Labour Ministers. So it was interesting – and worthwhile – to put our case to a Minister who not only will chair a significant gathering of Finance and Trade Ministers this year (the OECD Ministerial) but also has a reputation among his peers around the world as an independent thinker.

As we left, Mr Tremonti handed out copies of a lecture he gave at the Party School of the Central Committee of the Communist Party of China in Beijing last November. Its title was “The causes and political effects of the first global crisis”. I read it on the way to Paris. It is not what you might expect from a senior minister in a right-wing coalition government. And the message that comes through clearly is that Tremonti believes we are in for even more serious upheaval unless there is a paradigm change. His answer? He calls it the “global standard” – a set of principles that should be accepted by governments as well as private actors as forming a global rule base for a globalized economy. At the OECD, he is pressing for a “Declaration on Propriety, Integrity and Transparency”. We thought it might work if linked with the “Merkel Charter” bringing together substantive parts of existing international instruments on labour standards and trade. Chancellor Merkel had convened a meeting with the Head of the ILO, WTO, OECD, IMF and World Bank in Berlin the previous week. Interesting that two right of centre European politicians are leading the move for new global standards!

Yes, we do need new global standards. But will it be too little, too late to stop the turbulence? The next day, Greek unions held a general strike. Despite the efforts of the unions to hold a massive peaceful demonstration, violence broke out, tragically taking the lives of three bank employees, and unfortunately fulfilling our often repeated warnings about the risk of breakdowns in social cohesion.

And the cloud of volcanic ash returned to close airports in Ireland and Scotland. Unanticipated and recurring natural events, a man-made disaster in the making for the Eurozone economies, a major environmental threat in the Mexican Gulf due to the breakdown of technology – all these events show that the arc of history never falls back into a neat linear progression. Those who believe so, and advocate “back to business as usual”, are engaged in wishful thinking of delusional proportions!


Links:

• Giulio Tremonti’s lecture “The causes and political effects of the first global crisis” - http://download.ei-ie.org/Docs/WebDepot/G.Tremonti%20lecture%20Communist%20Party%20Beijing%20Nov%202009.doc
  
• The “Merkel Charter” - http://www.financialtaskforce.org/2010/04/28/joint-press-release-by-german-federal-chancellor-oecd-secretary-general-wto-director-general-ilo-director-general-imf-managing-director-and-world-bank-president/