Source: theory.gmw.cn
Regarding their view about economic growth, Europeans lay much emphasis on stable development of the economy, and this emphasis on stability is rooted in all aspects of their fiscal management and development of monetary policies. This can be clearly seen from the name of a fundamental treaty of the European Economic and Monetary Union (EMU) "The Stability and Growth Pact": in the name, the word "stability" is placed ahead of the word "growth". This idea suits the actual situation of Europe as a mature and developed economy. Before the outbreak of the international financial crisis 10 years ago, generally speaking, the idea and practice of economic stability in Europe has played a positive role in ensuring growth of the world economy, and it has to some degree smoothed fluctuation of the world economy.
In the new economic landscape, can Europe continue to play its role as an economic stabilizer in the world?
Historically speaking, that Europe can play the role as a stabilizer of the world economy attributes to the following 4 factors: firstly, huge size and relatively stable growth. In terms of GDP, the percentage that the EU's economy accounts for in the world's total has maintained at over 20% for a long time; in terms of import and export volume of goods and service, the percentage that the EU accounts for in the world's total import and export volume is about 16%. In terms of economic growth, the EU surely cannot be considered a driving engine of the world economy’s growth, but its growth is relatively stable, and the growth rate is just 3%, even in a good year; while its growth may not experience a steep drop in a bad year. Compared with the sharp fluctuation of economic growth of newly emerging economies, the EU's economic growth seems to be more stable.
Secondly, relatively high openness to the outside. If an economy has a big size, but it closes its door and concentrates on building of itself, then, it will not be able to play an important stabilizing role in the global economy. Objectively speaking, compared with other economies, the openness of the EU's economy is relatively high. Regarding export, the EU is the region that exports the biggest volume of goods in the world; regarding import, the EU is the largest goods export destination of over 80 countries in the world. These all show that there are extensive and close connections between the EU and other economies.
Thirdly, Europe has the rules shaping capability that basically complies with the development logic of the global market. Soft power is an important means by which Europe plays its role in the world. Its huge economic power and high influence on other economies also lays a foundation for Europe's use of its soft power. Whether in various institutions within the Bretton Woods System that was established after the World War II, or in the negotiation for bilateral free trade agreements that have been quickly developing recently, Europe invariably has played an important role. Although the EU often wields its big stick of trade sanctions on some countries in Africa that don't comply with its values, it is relatively cool-headed in dealing with such big players as the US and China, and it knows that it should do things according to economic logic. Therefore, although some trade rules that the EU has proposed include many selfish calculations, they also contain some commendable parts, and basically serve to promote development of the world market.
Fourthly, the unique Euro. The institutional design of the European Economic and Monetary Union (EMU) is very unique: the currency is unified, but the members’ policies about finance and exchange rates are diversified. The European Central Bank is highly independent. It mainly concerns price stability in the region, and doesn't consider control of the Euro’s exchange rate as one of its objectives; and the dispersive decision-making capacity of the European Council also makes it very difficult for the governments of EU member countries to affect the Euro's exchange rates. Compared with the US dollar, change of the Euro's exchange rate is more market based, and it is less often used as an instrument of trade policy. Although the Euro's role is far from being comparable to the US dollar, it provides an option.
In recent years, with the double impact of the international financial crisis and the European debt crisis, many problems in Europe have erupted at the same time, with the result that Europe's future development remains full of uncertainty. For instance, breaking out of the European debt crisis and the negotiations over Britain's exit from the EU has lead people to raise suspicions about their confidence in the Euro and the continued existence of the EU itself. In addition, being faced with the quickly changing world economic landscape, the EU is becoming more introverted and conservative. This obviously will have some negative impact on the stabilizing role that Europe had previously played in the world economy. Maybe limited by the size of their economy, or maybe limited by their openness to the outside, no another economy that can play a stabilizer role comparable to that of Europe has clearly stood out. Europe's loss of its role as a stabilizer will not be good news for growth of the world economy.
However, in terms of the historical perspective, the development of Europe's integration has not been smooth sailing. Yet it has continued to move forward even in crisis. So, it is still too early to judge that role of the European economic stabilizer is about to disappear. What should be noticed is that suspicion is now raised about one thing we didn’t doubt before, and that may indicate something bad in itself.
(The author is the Director and research fellow of the Research
Division of Shanghai Academy)
