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 the ASEAN regional and individual economies.
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, 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 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 Briguglio and 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.
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, 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 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 Briguglio and 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.
