Europe needs a vision, not just doing something

Imagine a football match without goals and goalkeepers, everybody are just trotting around anxiously. Imagine a ship on the sea without a compass or any other navigation system. Imagine a doctor treating you for symptoms even though you haven't agreed that you want to get better. This is what Europe is doing right now with the eurozone crisis.

In strategic management a vision is defined as the way an organization should look like in the future, what is the state of things. In the same manner we could (and most definitely should!) have a vision for Europe. What is the future of Europe? Do we want an economic union, a political union or even more integrated Europe? If we knew that it would be awfully easy to find a solution for the crisis.

If we wanted tight economic cooperation amongst countries we should let Greece suffer for their own overspending and throw them out of the euro. If we wanted United States of Europe we should introduce bazookas like eurobonds or unlimited supply of liquidity, bond buying and loans from ECB.

A clear vision of Europe is making it so difficult to find a solution to the crisis since everybody has their own vision for Europe. Again - imagine a football match where everybody would have their own rules for the game.. It is not too late yet. Even though the project of Europe should have began with a common understanding of the ultimate goal, it is not too late to agree upon one right now. The markets don't need a bazooka per se, they need a clear understanding of how Europe is going to tackle the crisis.

Bye-bye eurobonds, enjoy the crisis

Germany and France have once again publicly opposed eurobonds as a measure of resolving the crisis. Eurobonds are like regular bonds, only they are guaranteed by all eurozone members jointly which means that they carry very low interests and are probably rated with a triple A rating (maybe not as low rates as in Germany but relatively low still). Eurobonds would replace national bonds so all countries issuing eurobonds can borrow money from the markets with a low price.

Eurobonds would cure one of the biggest problem currently spreading in the markets - possibility of attacking weaker countries. What happened in Greece, Ireland and Portugal was about to happen in Spain and Italy. Since these countries didn't come out of the recession as quick and their public finances were a mess, yields on their national bonds started to rise quickly. This means that bigger interest costs have to be paid for their national debt hence making their fiscal position even worse. Weaker fiscal position means bigger risks again and yields rise again - it's a self-fulfilling process. With commonly guaranteed eurobonds attacking countries' bond markets is not possible (in normal circumstance) and all member-states can borrow cheaply.

Thus with eurobonds we can also cure the biggest problem today. With cheap money eurozone countries could (instead of too much austerity right now) stimulate investments and introduce reforms like targeting tax evasion for example. This would lead problematic countries to growth and cure the budget deficit problem as well (together with moderate austerity of course).

So why Germany and France oppose eurobonds. Their main argument is that without common economic and budgetary policies there is no point in issuing jointly backed eurobonds because this would punish stronger countries (by raising their interest costs). This is of course true but countries like Germany and France could push through any reforms they wanted in EU. Especially at times when the whole Europe is looking for a way out of this mess. We have elections coming in Germany and Mrs Merkel has voters to worry for. Main opposition parties in Germany already support eurobonds and thus it is a matter of time when they are introduced.

Until then, bye-bye eurobonds and enjoy the crisis!