No lowering of the guard

The subprime mortgages crisis erupted in the summer of 2007, with its first signals of the credit crunch. The collapse of Lehman Brothers occurred in September 2008, confirming the gravity of the situation and its fallout at the planetary level. Lastly, on 14 September 2009, came US President Obama’s speech insisting on the “need for rules” to regulate Wall Street and that of European Commissioner Almunia suggesting that the recession is slowly easing, while at the same time pointing out the need to tackle its more damaging repercussions.From the subprime meltdown to Pittsburgh. Rules and responsibilities: with these two keywords US President Barack Obama addressed the US world of finance and credit in Wall Street’s Federal Hall a year after the collapse of Lehman Brothers. “The crisis is far from being over – said the President at the headquarters of the New York Stock Exchange -, nor are its consequences”. Obama added: “We shall not go back to the bad old days of uncontrolled access to credit”. He also insisted on the fact that there won’t be any new bank bail-outs with public money. Obama then spoke of the need to create a regulated market, both at home and on the world market. He also remarked on the social and employment costs deriving from the crisis, saying: “Citizens are paying too high a price”. He then added: “An energetic reform of the system of world finance is needed”. The next summit to define the rules of that market will be the G20 at Pittsburgh on 24-25 September.The European perspective. The agenda of the G20 is also being discussed within the other economic power of the Western world, the European Union. The European Parliament, now meeting in Strasbourg, is debating it; the heads of state and of government called to meet in Brussels for an extraordinary summit on 17 September are also due to discuss it, as well as climate change and the main geopolitical questions of the day. As far the economic situation is concerned, the Commissioner for Monetary Affairs, Joaquin Almunia, gave an assessment, based on the latest data, on Monday 14 September: “The decline of gross domestic product significantly decelerated in the second quarter of 2009”, falling from -2.4% in the first quarter to -0,2% in the period April-June, explained the Spanish politician in presenting the “Interim Economic Forecasts” based on the data of the economies of the main member states: Germany, France, UK, Italy, Spain, Netherlands and Poland, which together account for 80% of GDP within the European Union.Mixed messages? Almunia’s interpretation of the data he presented reveals, however, alternatively, a mixed picture: not only a “clearly improved” situation, but also continuing “uncertainties” and worrying developments on the employment front. “The improvement has improved especially thanks to the unprecedented injections of public funds into the economy both by the central banks and by the public authorities – explained the Commissioner -; but the weakness of the markets will continue to have negative repercussions on employment and on public finances”. “It is essential – he stressed – to continue to implement the economic recovery measures announced for this year and for 2010; we must accelerate the restructuring of the financial sector so as to make sure that the banks are ready to give loans on reasonable conditions as soon as businesses and families begin investing again”.An exit strategy. The Interim Forecasts issued by the Executive state: “The situation of uncertainty is being maintained at high levels and although in the very short term the recovery could be surprisingly better than the forecasts, it remains to be seen how long it will last”. The experts in Brussels consider therefore that the crisis is easing, “nonetheless, due to the downward revision of previous estimates for 2008 and for the first quarter of 2009, the rate of GDP reduction forecast for the whole of 2009 remains altogether unvaried at 4% both inside the EU and in the Euro zone”. “We need – insisted Almunia – to define an exit strategy” from the crisis that is “clear, credible and coordinated in order to restore the public finances to the path of sustainability and find the resources to augment employment potential and growth in Europe”.In the EU and in the world. As regards the national data, the Commission maintains that Germany will register a GDP reduction in 2009 of -5.1%, Italy -5.0, Holland -4.5, the UK -4., Spain -3.7 and France -2.1, while Poland is presenting a slight growth of GDP of +1.0% on an annualized basis. The Interim Forecasts also makes some upbeat predictions about global scenarios: “the world economy is no longer in freefall. The recent data on trade and industrial production, as well as business and consumer confidence, are encouraging”. Asia “seems to be driving the recovery”; growth in China “remains solid, while in the USA the contraction has been stabilized”. But, insist the economists, “the duration of the global recovery and the features it will assume are still surrounded by great uncertainty”.