THE BLOG
05/12/2013 09:17 GMT | Updated 03/02/2014 05:59 GMT

First Step to Solving the Eurozone Crisis: Change our Perceptions

How not to save a company

Imagine the following. Your company is on the verge of bankruptcy. The only way to get out of this is to get all your employees to put in more efforts and energy. To do so, you threaten to cut off their pays because you are dissatisfied with the progresses that they have made so far. On top of that, you are constantly telling them how little they have been contributing to the company and even how useless they are. At the same time, you are pinning high hopes that they would get your company to be prosperous again.

Does this make any sense? Of course not. But if this is the case, why is it that many northern European countries view - and treat - their southern neighbours so badly? In fact, these latter countries are often called the "periphery", suggesting that they are far from being as important as the "core", if not depending on it for their own survival.

If this does not sound hegemonic enough, the weakest economies - Portugal, Ireland, Italy, Greece and Spain - have been called "PIIGS". Now, that is blatant bullying. And this does not stop here. What's worse is that we are not living in the world of Animal Farm: PIIGS in the Eurozone cannot stand up. By labelling them as livestock, we are effectively saying that these weaker economies in the south would never be on their feet again.

Perceptions, deceptions

There is a common yet deeply flawed perception that many people hold: Germany (as the leader of the core countries) would solve the on-going Eurozone crisis. This is likely to be wishful thinking. As I pointed out in my previous blog post here, Germany is not as strong as it really looks. Other members in the supposedly economically stronger north does not necessarily fare better neither. For instance, France, the second largest economy in the EU, is struggling to control its public finances and raise its competitiveness. On the other hand, The Netherlands is likely to remain in recession because its households are over-laden with debt; a quarter of Dutch homeowners are thought to have "negative equity", meaning that their houses are worth less than their mortgages.

Yet, this popular but misguided perception has led to a more far-reaching problem: While the northern part of the Eurozone continues to be, wrongly, hailed as the saviour of the Eurozone, the southern part keeps on being demonised. This is perhaps particularly true for Greece. Even though the country accounts for just 2% of EU's GDP, it has received far more than its fair share of negative television coverage from abroad, according to Media Tenor.

Greece: Visibility and tone of coverage on Greece by global media markets, International TV media, 2010-2012

2013-12-04-Slide1.JPG

Source: Media Tenor

North + South = Saving the Eurozone

Telling your employees that they are a bunch of under-performers non-stop will never motivate them to rescue your company. Just as if we want the southern countries to be on their feet again, concentrating on the bad news will not help. At the risk of sounding like a self-help guru, I believe that celebrating their successes - as opposed to repeatedly talking about their failures - can boost morale and hence add momentum to reform.

While the media repeatedly remind us that Greece has not been able to meet the requirements imposed, rarely do we hear what the country has achieved. So, here are a few facts: the country has managed to make the largest fiscal adjustment of any country in history, with more than 12% of GDP in the past three years. The country is ranked no.1 in terms of responsiveness to Going for Growth report recommendations offered by the OECD. Portugal and Spain also ranked high on the list, with 5th and 6th, respectively.

By pointing these out, I am not claiming that the southern neighbours are done with all the necessarily reform to revamp their economies - far from it. What I am saying is that we should not stop accepting a lopsided view of the negative aspects of these countries. Indeed, as my thought partner Dr. Mark Esposito will point out in his forthcoming blog post, the south really has a lot more to offer.

A balanced view will allow us to be better at thinking about the crisis. After all if we only see our southern neighbours as burden, we are not only losing half the equation to solving the Eurozone crisis; we are also missing out on most of the intelligence.