On December 15, 2011, IMF Chief Christine Lagarde raised red flags when she said that though the euro zone nations have taken numerous quick-fix steps to resolve the individual nations’ challenges, the wider debt crisis will persist if there is not a cohesive effort within the international community to resolve the challenges posed by the financial meltdown. She stated, “The risk from an economic point of view is that of retraction, rising protectionism, isolation ...” Lagarde continued, “This is exactly the description of what happened in the '30s and what followed is not something we are looking forward to.”
Lagarde is right in her assessment not only from a European point of view, but also from an American point of view. Europe’s continued challenges are no different that the challenges of the late 1920s and 1930s. Protectionism on an international scale led to increased unemployment; decreased revenues from a federal, state, and local level; and served as a catalyst for the long-standing global Depression resulting in a negative socio-economic/political environment that led up to World War II.
To avoid the same sort of disaster of the 1920s and 1930s, the Eurpoean Union must declare a bank holiday and close the financial institutions for one week to fully assess the euro zone banking and finance industries and restore citizen confidence.
By taking a step back and assessing the EU’s problems not from one individual country, but rather the perspective of all countries in the EU, the EU may very well be able to proactively stave off the perceived impending collapse of their extremely fragile economic community. In order to do so, the EU should look at the steps taken during the American Bank Holiday of 1933, the legislation of the Emergency Banking Act, as well as Franklin Roosevelt’s leadership in guiding America through the week-long halt from March 5, 1933 to March 9, 1933 in transactions which restored citizen confidence in the American financial system as Europe looked to war.
In today’s technologically-advanced financial and commerce systems, it’s not going to be easy halting the markets for a continental week-long banking/financial market holiday, but it is something that simply must be done to fully get a handle on the situation, stop citizen unrest, global uncertainty, and continued free-fall crisis management. The countries of the euro zone have simply exhausted nearly all of their options.
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