Source: Today (Singapore)
Source type: Newspaper
Published on: 18 May 2010
The country bordered on default until a multi-billion euro package was cobbled together last week. Markets plunged, not only in Europe but across Asia. The economic problems of Greece were no surprise. The danger signs had been clear for some time.
Many, however, assumed that the country - which represents only about 2 per cent of the European economy as a whole - was too small and peripheral to matter to any one but the Greeks themselves.
Markets also assumed that the European Union, with its euro zone and other pillars of integration, would have a ready solution to deal with the risk.
That assumption was upended by the political intransigence of Germans who baulked at the price they would have to pay for their European brothers. Investors were spooked and markets collapsed.
What does this mean for Asians and their relations with Europe?
GREY SKIES IN EUROPE
While Greeks protest the austerity measures they must undertake, concern is turning to other vulnerable economies.
Portugal, Italy, Ireland and Spain have been grouped, together with Greece, as the Piigs.
Questions also remain over Central and Eastern Europe. Even the United Kingdom is not exempt.
Its national debt and recurring budget deficits are cause for concern. With London's status as a global financial hub, most believe that the situation can be managed. But after the indecisive election results, the unlikely coalition combining Conservatives with Liberal Democrats must take prompt action and show resolve to do what is painful but necessary.
Europe seems to be entering an austere period. Cut backs are certain, and future problems possible.
In this, Iceland, on the northern periphery, may be a kind of precursor.
Struck early and deeply by the financial crisis, that economy has seen little recovery. Instead of generating cash, Iceland has instead spewed ash, causing massive disruptions for flights and costing airlines and travellers many billions.
Similarly, the current forecast for the continental mood is for grey skies.
Worse, if one or another economy follows the Greek example, more turmoil must be expected.
BLUE SKIES IN ASIA
For Asia, the forecast is a stark contrast. Rates of growth in China, India, Indonesia and almost all around the region have defied negative predictions thus far. This gives reason for a growing confidence and optimism about blue skies ahead.
The current situation in Europe may remind Asians of their own regional crisis back in 1997.
Such memories are less than positive for relations with Europe. Asians in that crisis were forced to take bitter medicine administered by the International Monetary Fund - by convention, always headed by a European.
The Asia-Europe Meeting (Asem) will also bring bittersweet memories. This started promisingly amid the excitement of the Asian miracle.
But, in the wake of the 1997 crisis, many Europeans lost interest. The Asem process has continued until today but has never fully recovered.
With Asean, Europeans have routinely downgraded contact, citing their compunction against dealing with the regime in Myanmar. No free trade agreement has been concluded between the European Union and Asean, even as major European economies have sought to fete China.
Many Asians may have good reason therefore to relish the current reversal of fortunes.
ENLARGEMENT DOES NOT MEAN ENGAGEMENT
There are however good reasons for Asians and Europeans to engage each other.
As the Greek crisis showed, the markets and financial systems are global. Europeans are also significant trading partners and investors in Asia. If their economies remain in the doldrums, there will be knock on effects.
Moreover, while the United States remains the most powerful country in the world, it too has felt the effects of the crisis.
A more multipolar world lies ahead and a central challenge will be to handle global interdependence without a single dominant decision maker.
In such a world, a rising Asia must play a larger part. So too can Europe, despite all its current challenges.
Understanding and improving Asia-Europe relations would be a positive development in managing global interdependence. Yet such an outcome seems unlikely. Asians are rushing ahead on their own. On their part, most Europeans will be preoccupied with their problems and struggle to engage meaningfully with Asia.
The Asia-Europe Meeting is scheduled to be held in Brussels in October.
There are already some 45 participants, and the 2010 Summit will be noted for bringing in Australia and Russia.
But enlargement will not mean engagement. Unless attitudes change, the two regions - with contrasting expectations of rise and decline - may end up looking past each other.
The writer is chairman of the Singapore Institute of International Affairs.
