As the Finance Minister of the EU meet in Luxembourg, we are once again faced with another crisis as budget figures released last night in Athens suggest the Greek government will miss a key deficit reduction target. As I wrote in a letter to the FT, the ongoing cost of uncertainty and the lack of strong political leadership are taking a daily toll in boardrooms and living rooms across Europe. It is time for decisive action to be taken that will stop the EU limping rapidly towards the edge of an even greater crisis.

Executives, like investors, need confidence in their economic forecasts – and confidence fades with every apparent setback or short-term fix. Today’s news that Greece’s own deficit reduction target of 7.6pc of GDP will be missed and will actually be 8.5pc of GDP is another stark reminder of the inadequate response to the crisis. Likewise it is not just raising the borrowing costs for countries like Spain and Italy, last week European companies had to offer the highest interest rates in more than two years to attract wary bond investors.

Business leaders lack confidence because politicians lack credibility, though granted they are substantially hampered by their structural framework. Corporate executives need clear and distant horizons to make acquisitions, expand operations and hire workers. Mergers and acquisitions in Europe were down more than 40 percent in the third quarter, Bloomberg News reported this week, because business executives were hesitant to make strategic decisions and pay more to finance them.

Companies are sitting on huge cash reserves. In the US, for example, companies had stashed away $1.2 trillion (€880 billion) in cash and short-term liquid investments at the end of last year, according to Moody’s. With the right political agreements, companies would quickly become part of the solution, loosening their purse strings to create jobs, sales and tax revenues.

But instead of generating enough jobs, the G-20 rich and developing countries are on the edge of a job crisis, according to a report this week by the Organisation for Economic Cooperation and Development. More than 40 percent of the jobless in Italy, France and Spain have been looking for work for more than a year. A strong economic recovery is critical, the OECD stressed, and rising social tensions in one country will affect its neighbours.

Without a vibrant financial sector and common currency there will be no strong economic recovery in Europe. Unless sustainable political solutions and structural reforms are swiftly adopted, we will continue to lose our economic footing and the hard-won gains of the single market.

There are several proposals on the table for the October summit of the European heads of state. I will not wade into politics, but instead encourage business leaders throughout the Europe to press the case for rapid, long-term political solutions that will restore global confidence in the financial sector and faith in the euro. The European Union’s economic legacy and future hang in the balance.

About the Author: Hendrik Bourgeois is Vice President of European Affairs at GE (General Electric Company). His prior positions at GE include General Counsel EMEA, Senior Counsel, Competition, Regulation and Government Relations for Europe, and European Competition Counsel, serving all GE businesses on a wide variety of competition law matters involving mergers and acquisitions, distribution, R&D activities and compliance issues.

Author : ge_europe
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