Fret all you like about the state of the South African economy and the ideological battle over its management, but know this: right now, anything decided in Pretoria pales into insignificance compared with what is going on in Europe.
Cannes is best known for its film festival, where topless starlets compete for attention with high-minded cinema, but this week it stages the latest instalment in the long-running horror franchise that is the sovereign debt crisis.
The G20 summit of major economies brings together the rich world’s heads of state, who have been failing to staunch the Greek wound in the eurozone, and the emerging powers, whose leaders have been looking on in angry disbelief as their own countries’ prospects are dragged down.
Finance Minister Pravin Gordhan has been forthright on the subject, expressing the widely held view that Europe must recapitalise its banks and provide deep liquidity to its bond markets. “Europe has been behind the curve for the last year or so,” he said recently, a relatively benign expression of the irritation he and other developing world finance ministers are feeling.
The latest rescue plan, now thrown into doubt by Prime Minister George Papandreou’s talk of a referendum in Greece, went some way towards addressing those concerns, but not far enough.
The South African government’s view, in rare accord with that of the United States, is that European leaders have been far too focused on austerity when the real risk is slumping growth and deflation, which will make it harder and harder to pay off the debt, budget cuts notwithstanding.
The timidity of the European Central Bank in refusing to fund the bailout scheme directly by printing money, a pretty standard thing for a reserve bank to do in the circumstances, is an additional source of frustration.
The fractured regime of multilateral economic governance can do little in the face of Europe’s deadlock, but we will all feel the pain of failure.
If Europe still aspires to greatness in the world, it must listen to the world.
Read the first half of the editorial “Courting disaster with the judiciary“