Global crisis – fragmented answers

Institute for World Economics of the Hungarian Academy of Sciences
The financial crisis hit the EU member states in different ways therefore the reactions to it have not been uniform either. In fact, a joint supranational approach could not be applied due to the fact that economic policies belong to national competences – only their coordination is effectuated at the EU level. These are the reasons why the EU does not have a single strategy to fight the crisis. The European Economic and Recovery Plan of 200 billion Euros proves this fact very well: 170 billion is originating in the national budgets, while 15 billion would be set aside from the EU budget and 15 billion could come from the European Investment Bank. Such a significant amount of money injected into the troubled economies of Europe may quickly entail the increase of budget deficits in the Eurozone countries threatening the Euro’s stability and also showing a bad example to the member states still outside the single currency area. So all in all, this is far from a genuine European response to the problem – and this criticism is shared by many Hungarian experts.[1]
In regards to the international power constellations, significant changes must be reckoned with in the near future. Obvious signs for this are the transformation of G7 to G20, reflecting the growing weight of great and dynamic economies such as China, India or Brazil. In expert circles a kind of rearrangement of the international financial institutional system is also expected. As there was Basel II there should also be a Bretton Woods II.[2] The present institutional set up should be revised (e.g. giving the International Monetary Fund (IMF) a greater controlling role, and even envisaging the merger of the Bank of International Settlements, the World Bank and the IMF, etc.). In the reformed international institutional system yielding greater voice to emerging economies seems to be inevitable. Within these developments, the EU (and especially the Eurozone) should play a more coherent role but this would require greater competences for the Union in terms of both tackling such crisis situations within the EU and being able to represent a single coordinated position on such issues in the global reform processes.
Hungary actually also made its important contribution to the crisis management efforts at the European level. At the occasion of the EU summit in October 2008, the Hungarian Prime Minister tabled four proposals in this regard.[3] The first one was about refocusing the EU’s cohesion policy in favour of the small and medium sized enterprises. The second one suggested to temporarily suspend the budget deficit limit of 3 percent of GDP in crisis times. The third one referred to widening the intervention scope of the European Central Bank to the whole of the EU, and finally, Mr. Ferenc Gyurcsány also proposed to have a joint financial supervision system at European level. These proposals were actually backed by the Hungarian opposition as well. The chairman of Fidesz – Hungarian Civic Alliance, Mr. Viktor Orbán, reacted positively to these points and ensured the Prime Minister that these issues will also be supported by the Hungarian EPP-ED members.[4]

[1] Based on round table conferences at the Institute for World Economics in January and February 2009.

[2] Based on round table conferences at the Institute for World Economics in January and February 2009.

[3] Gyucsány négy javaslattal érkezett Brüsszelbe,, available at: (last access: 27 February 2009).

[4] Ibid.