EUROPEAN COMMISSION PRESIDENT JOSE MANUEL BARROSSO

To: The Right Honorable European Commission President José Manuel Barroso

From: Athinarayanan Sanjeevraja

RE: EU Summit

Suggestions

Good Morning President. The EU summit has brought major changes in the way the debt crisis can be handled. The European Council decisions offer new instruments to shape a sustainable solution for the Greece situation but European Council fail to eradicate all uncertainty concerning the eventual outcome of the Euro-zone debt crisis. The stability of the Euro-zone will depend on fiscal and economic policies and that foster progress towards a EU political union.

I would like to highlight one important objection to debt monetization is that it leads to increases in a country’s money supply, devaluing its currency and weakening consumer purchasing power. But weak Euro policies will bring renewed export power to the European economies as well as increasing consumer wealth in creditor economies. This is precisely the kind of rebalancing the European economy needs. The over indebted European countries will borrow less and consume less while other underleveraged growth economies will lever up and consume more. Living with weaker Euro might not seem so objectionable especially relative to the other alternatives. If it leads to strengthened economic performance and balanced sheets on sovereign debt.

Second is to restore competitiveness in European Union member states. To do that it is important to analyze the factors leading to the loss of competitiveness. The first factor is human factor. You have to convince the populations that they in future will have to do without bailouts from the EU at the same time as you bail them out. And that their working hours and living standards must correspond to the developmental level of their economies. The factor is to figure out what has led to the lack of competitiveness more or less in almost all European countries except Germany and Sweden. In both Germany and Sweden the industrial sectors are large and sophisticated and their firms have been relatively slow at outsourcing their industrial production. In addition to this Sweden has got a very efficient mining industry. It is important to shift focus from the malfunctioning, least developed countries to the highest developed countries. Although the outcome should be that you have to lower your wages and living standards to the same level as your competitors in the newly industrialized countries.

Let me conclude it, to escape from the debt trap, the Euro-zone needs annual growth of at least 2% over an extended period. If growth does not persists then doubts about the sustainability of debt will continue to resurface at short intervals. So the importance of growth oriented reform is now greater than ever. The top priority now must be to ensure that the EU summit decisions are implemented swiftly and do not get begged down in a row about the details. I am confident that Euro will survive swiftly and new member will be lining up to join the EU in the future.

I will be convinced when I see action rather than words.

Thank you very much for your kind attention Mr. President.

Sincerely,

Athinarayanan Sanjeevraja.