08 Aug 2008 

THE WALL STREET JOURNAL: "George Alogoskoufis: Trade Freely and Expand"

In periods of world-wide economic turmoil and international uncertainties, it is only natural that people will display increased anxiety about the future. However, Europe has successfully overcome even bigger challenges in the past and has the ability to do it again. A union that emerged from the ruins of a divided continent to create one of the world's largest areas of freedom and prosperity is strong and adaptable enough to cope with the challenges we face -- provided we can summon the leadership, vision and resolve required.

The pause for reflection following Ireland's rejection of the Lisbon Treaty must not be allowed to turn into a prolonged period of inertia. Inevitably, the increasing uncertainty about the treaty raises questions about the prospects for further enlargement. The resolution of this issue should demonstrate the EU's continued potential as an agent for change and progress across the continent. It is important to recognize that the desire of more countries to join the EU remains one of the most dramatic examples of the union's success.

We must therefore ensure that the most recent round of enlargement does not become the last. Until the status of the Lisbon Treaty is resolved, the EU should aim to sustain momentum by advancing forms of deep integration that bring aspirant countries as close as possible to the point of membership. That should include large countries like Turkey, as well as smaller nations in East and Southeast Europe.

The second major challenge is to restore confidence in our economic prospects. After a long period of rapid and sustained expansion, it is clear that the global economy is now entering a much more difficult and uncertain period. Current forecasts do not justify talk of a global recession. But a number of European countries, along with the United States, are likely to experience a significant contraction of growth in the immediate future as accumulated international macroeconomic imbalances unwind and economies adjust to cope with the effects of weakened financial markets and higher commodity prices.

This is a problem of political as much as economic management. It is imperative that European governments work with each other and with countries across the world to demonstrate that free trade and open financial markets are compatible with the widespread need for economic security and progress.

Imperatively now -- following the difficulties of the Doha Round -- we need to work together with increased effort to address the issues that caused the halt of the talks and revive the momentum so as to achieve a successful outcome for the world economy and for developing countries. There will be no winners if we fail on this ground.

The EU could do more to lift the current mood of economic and political uncertainty by extending the benefits of economic integration throughout its own neighborhood. This is a parallel but separate issue from the question of enlargement and ought to be pursued on its own merits. The benefits of this approach are already evident on the basis of long experience. On each occasion that the EU has welcomed new countries into its common economic space, the effect has been a dramatic and sustained rise in growth for the new entrants, matched by greater trade and prosperity for Europe as a whole.

Nowhere does this lesson apply more strongly today than to Southeastern Europe, a region of 10 countries and 140 million people with great potential to become an engine for future growth and prosperity in Europe. Most of these countries are poor by EU standards, yet given the opportunity they could reward Europe with a huge dividend in terms of extra growth and trade.

Achieving this goal will be a major undertaking for countries in the region, including those, like Greece, that are already in the EU. But it is also something that the EU as a whole should be actively committed to. And to this end, we should all eliminate trade barriers, improve the investment climate, foster cross-border economic and educational partnerships, boost infrastructure developments in transport, communications and energy, and encourage structural economic reforms. In this respect, the recent decision of EU ministers for economic and financial affairs to accelerate the establishment of a Western Balkan Investment Framework is extremely positive.

One thing is certain: Europe cannot afford to stand still in the face of current international difficulties. Inertia will increase popular cynicism and, with it, the threat of a political and economic backlash. We need to identify policies and initiatives to shed light on the practical benefits of integration. The effective implementation of the Lisbon Strategy and the consistent application of the rules of the Stability and Growth Pact remain imperative. Extending the boundaries of economic prosperity to include the whole of Southeastern Europe would be one way of demonstrating confidence in the continued vitality of the European idea.

Mr. Alogoskoufis is the Greek economy and finance minister.