Global Watercooler The Eurozone’s Survival

Global Watercooler

Around the watercooler today: Wolf bullish on Europe; the plight of refugees in Libya; and Serbia and Kosovo try to build confidence.

Why the Eurozone Will (or Won’t) Survive

The most-read economic columnist in Europe, Martin Wolf, declared this morning that the Eurozone would survive, so at first glance that should prompt the transatlantic community—the world’s largest economic space—to heave a sigh of relief. He draws upon a new report by Nomura Global Economics, “Europe will work.”

As he’s been a skeptic in the past, his arguments for why the eurozone is “highly likely to survive” are interesting reading. He says, “first, the Eurozone is backed by a profound political commitment; second, the long-term interests of participating countries are behind it; and, finally, the members can afford it. In short, the eurozone has the will and the wherewithal to keep the euro experiment afloat.”

If only the world were so simple. Though Wolf may prove right (he often is), he underestimates the power of domestic politics, whether in Germany or Greece, and of markets. The world is never as orderly as Eurocrats might like. I was more convinced by Paul Krugman’s piece a while back in the New York Times Magazine, “Can Europe Be Saved?” reflecting on the fatal flaws of the euro at its inception and how they are coming to roost. Read these two pieces beside each other and see what you decide.

U.S. interests are huge here, so we hope Wolf is right. The only thing worse than having your most important partners on the world stage so focused on their own integration, instead of helping you solve world problems, which is our current problem, is to have them further distracted by financial and currency crisis.

Mideast Side-Effect

Our South Asia Center director Shuja Nawaz observes that one of the underestimated, negative side effects of the unrest in the Middle East is the displacement of workers from South Asia. Thousands of them are currently among the refugees from Libya in the no man’s land on the Libyan-Tunisian border. Many of them were held up by Libyan soldiers and deprived of their papers and money. Meanwhile, their families back home suffer, deprived of the valuable remittances that these workers send home every year. Some 80,000 Bangladeshis work in Libya.

According to the Financial Express of Bangladesh:

Bangladeshi nationals working abroad sent US$974.46 million in 18 working days of February last, up by $3.92 million from the previous month. In January 2011, the remittance was $970.54 million, according to the central bank statistics released Thursday.

"The inflow of remittance is still in a stable position. But we are very much cautious about the Middle East situation," a senior official of the Bangladesh Bank told the Financial Express. The Central Bank is watching the latest developments with concern. The country received $7.495 billion during the July-February period of fiscal 2010-11, registering a 2.49 per cent growth over the same period of the previous fiscal, the BB’s data showed.

India could also suffer from the unrest. Of the total remittance inflows of $52 billion sent by expatriate Indians in 2010, the West Asian economies had a share of 48% or $26 billion, states the Financial Express.

How Badly Does Serbia Want to Join the EU?

Negotiations start today between Serbia and Kosovo, a reminder that we’re still a long way from finishing the job of creating a Europe Whole and Free (and at peace). They are the first talks between the two parties since Kosovo proclaimed independence in 2008 against the angry protests of the Serbs and their friends. Mercifully, these talks won’t focus on Serb recognition of Kosovo but instead on “confidence building measures” such as customs, air traffic control and land registry questions.

What the talks will really test over time, however, is whether Serbia wants EU membership badly enough to bury the hatchet on Kosovo. The EU magnet remains one of the world’s most powerful forces in bringing about this sort of positive change.   

Fred Kempe is president and CEO of the Atlantic Council. His latest book, Berlin 1961, will be available May 10.

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