The markets, or rather investors , are waiting for the EU summit to begin this week, in hopes that there will be some clear signs of what policies Europe's leaders will try next to avert a deepening debt crisis. Business and policy leaders in emerging economies will be watching closely as well. At Project Syndicate , Dominique Moisi says there is no room for schadenfreude now. In the past, emerging market leaders may have pointed to Europe's woes to stress their own success, they must be careful not to look at the situation without taking any pleasure from a crisis that is hampering their own growth. Until recently, Europe was a sort of mirror that confirmed for the major emerging economies the spectacular nature of their own success. They could contrast their high growth rates with Europe’s high levels of debt. They could oppose their “positive energy” with the pessimism dominating European minds. They were only too willing to advise Europe to work harder and spend less, as legitimate pride mingled with an understandable desire to settle historical scores and attenuate their legacies of colonial submission and humiliation. But, today, emerging countries are growing very concerned with what they rightly perceive as the serious risks to their own economies implied by excessive weakness in Europe, which remains the world’s trade leader. Moreover, Europe’s malaise threatens many of these countries’ political stability as well, given the close connection – especially in China – between the legitimacy of existing arrangements and the continuation of rapid economic growth. If the crisis in Europe were to cause annual GDP growth to fall below 7% in China, 5% in India, and 3% in Brazil, these countries’ most vulnerable citizens would be hardest hit. They were never part of the “culture of hope,” based largely on material success, that played a key role in these countries’ success. If social inequalities were to reach new heights, their frustration and resentment could manifest itself fully. In that case, Europe could suddenly become a very different mirror for emerging countries, revealing, if not accentuating, their own structural weaknesses. And that is why, just as Europe must save the Greek economy or Spain’s banks at all costs, emerging countries must do whatever they can to contribute to the rescue of the European economy. As Europe has learned, the longer one waits, the higher the cost – and the lower the chance of success. Read Emerging Markets’ Europe Problem here .
Filed under: global economic crisis, india, Brazil, China, Europe, emerging markets, Greece, contagions, project syndicate, Dominique Moisi, EU crisis, EU summit