The European Union was designed to create strong trading zone of European Countries, able to maximise each members industries, for mutual gains, in a global market place. Key to gaining cross-border industrial benefits was to fashion a financial harmonisation that would eventually craft a single market. This was more a political objective but huge global companies would also gain.

Fundamental to achieving this end was the formation of the Euro, as the single currency, removing foreign exchange risks and making it easier for companies to grow across borders and produce a more flexible migration of workers.

The Euro was subsequently introduced across the European Union with the UK and Switzerland the biggest abstainers, mainly due to their domestic concerns, especially in the UK and there was also a determination by the Swiss to remain truly independent and sit firmly on the mountain.

The financial crisis is putting an enormous strain on each EU State, despite the clear political objective now established, although it is very much work in progress, to bring about the many changes. The ultimate effect of the complete harmonisation of the European plan, would impact businesses, cultures and the way of life and working of everyone within the EU. If successful, the EU would be very well placed to compete on a global scale with other growing regions and would probably attract much of the international business into the region.

However, the collective established within the European Union appears to be faltering under the strain of the global financial crisis, the like of which, the world has never seen. Some EU States are wavering and looking to go their own way, like the Irish for example. I suspect the Germans aiming to follow, until behind the scenes pressure from the British and French governments. This is conjecture on my part but does explain the hastily arranged clarification presentation by the German President the morning after the night before. This all indicates a fragmentation, perverse to the European dream.

So far the European Union has been a success in some areas of its plans but in many others has fallen short. For example there is no harmonisation of fiscal policies and many domestic barriers designed to protect member States businesses. The crisis is attacking the weak areas of the European Union, which now finds itself engulfed in a global meltdown of the financial system. Markets and economies are under threat and individual governments are seemingly powerless, trusting as much to luck or reliant on forces beyond their control. This is a time when the European dream will be tested to the full. Can countries look outside self protection to the bigger global picture?

The credit crunch started in the USA and has rapidly infected Europe, spreading worldwide at a terrific pace. At the moment each hour of each day brings about a new evaluation of the problem and many knee jerk reactions by governments as the markets lurch from one view and idea to the other. What is clear, is that the territory we are in is uncharted and scary, where everyone is looking for leadership but actually trusting the stars and crossing their fingers to try to gain some comfort.

What started life as a crisis with the financial community between banks has now escalated into a global meltdown of the financial system, bringing economic disaster to the high street and will soon be affecting virtually everyone on the planet, in some way. Unfortunately the media has been presenting this crisis as the bailing out of banks with their fat cat executives already skulking away with their bonuses. As unattractive as this picture is, the fact is that the saving of the banks and the financial system is a necessity to all people, especially tax payers.

For the first time in the history of the financial markets, the solution to the problem lies outside of individual markets or governments to solve. Unilateral actions by governments will be fruitless in preventing this disaster from increasing. To stem the tide there needs to be conformity of actions domestically that dovetail into international actions to find solutions. Governments have to work together across all time zones and continents if we are all to achieve a soft landing, transcending normal adversarial politics and those nationalistic tendencies.

Tax payers need to be informed and educated about the crisis and why they need to steel themselves as we enter a new financial dark age. Forget the foreign holidays and the second and third car and concentrate on building security. It’s vitally important that the population receive explanations and see action with decisive leadership or risk social unrest on a scale not seen since the 1930s. 

There are dire consequences for self protection against a financial foe, which is greater than anyone could have imagined. Community leaders and politicians along with the best economic brains need to come together, work through the problem and act fast and decisively.

There is no single solution to this crisis! It will take a series of measures to first put confidence back into the financial system and then rebuild the finance industry to prevent any repetition. The problems are not only with the market but also with the global economy. The volatility of the oil price, the growth of economies in China and India and the political unrest within many parts of the world are all contributory factors in creating uncertainty and fear within investing institutions and individual savings and pensions.  

New measures should include multiple governments backing each of their banks by using investments from the tax payer and guaranteed loans to assist the interbank credit issues at the heart of the crisis. Once banks begin to deal with other banks with confidence, the crisis should then have a chance of being turned around.

No protective measures by individual countries will be enough and in the long term will do untold damage to their future. This is the time for a global coming together and the eventual production of a financial system that recognises the global interdependencies of markets and economies on each other as the failure to solve this global disaster is far to frightening to contemplate.   

By Gary Wright M.S.I.