Leadership, decision-making and governance in the European Union and East Asia: crisis and post-crisis

Abstract

The global financial crisis of 2007–2009 shattered many ideas and beliefs regarding the international political economy, and regional and global governance. Boom and bust have not disappeared; developed countries can be hit harder than emerging and developing markets, and the G20 has become the key forum to discuss global economic issues. Even though as of 2012 economic growth has resumed in most parts of the world, the looming public debt crisis in the eurozone and the need to rebalance the global economy indicate that the post-crisis world will undoubtedly look different. Two of the regions where the effects of the crisis have been felt strongly are the European Union (EU) and East Asia. Profound changes can be expected in these two regions as the EU struggles with its sovereign debt crisis, with austerity measures and the need for a longer term strategy of economic recovery, while East Asia reexamines its export-driven growth model and comes to terms with its growing relevance and responsibility at the global level. The EU is one of the regions where the crisis has had a far greater impact. A sovereign debt crisis followed directly the global financial crisis, shaking up the whole eurozone. So severe was the European debt crisis that the IMF was called upon to help rescue Greece, Ireland and Portugal. Even the wisdom of one of the central pillars of the European project—a common currency, the euro adopted by 17 diverging economies, was questioned. This was perceived by some within the EU as a symptom of integration fatigue and the decline of the European social model. In sharp contrast, East Asia appeared to emerge out of the global financial crisis stronger, as several economies staged a sharp recovery in 2010. The recession was shorter and milder than in other regions, and economic growth resumed swiftly. But East Asia also had to deal with the twin problems of being flushed with liquidity, because of funds moving from the low-growth economies in Europe, and fears of Asia Eur J (2012) 9:73–76 DOI 10.1007/s10308-012-0316-4