Mixed opinions about European Union’s ability to tackle the financial crisis

Finnish Institute of International Affairs
The financial crisis has not hit Finland as hard as some of the other European Union members. The Finnish Government has granted loans to some other member states and has also promised to finance Finnish banks.[1] Measures taken by the Union to tackle the crisis are in general seen as good although some consider them not sufficient enough.[2]
Remarkable or slow and cautious?
The EU was criticised in October for being disintegrated in responding to the financial crisis. First, the bank deposit guarantees were increased randomly in member states, and later the financial summit between larger member states instigated further disintegration between member states.[3] Finland’s Minister of Finance, Jyrki Katainen, disapproved of the larger member states making decisions between themselves.[4] Katainen also called for a joint decision on the bank deposit guarantees.[5] The Finnish Prime Minister, Matti Vanhanen, shared Katainen’s view and demanded more coordination between the member states after the debacle with the bank deposit guarantees.[6]

Strengthening the market rules without enforcing protectionist measures

University of Tartu
Among all EU member states, the Baltic countries have been hit particularly hard by the financial and economic crisis. While the Estonian economy expanded 10.4 percent in 2006 and 6.3 percent in 2007, it stopped growing in 2008, and the GDP is forecasted to decline by 5.5 per cent in 2009. The government has decided to implement massive budget cuts in order to reduce the budget deficit for 2009. The gloomy outlook has not changed the fundamental principles of the government’s economic policy: i.e. commitment to liberal markets and accession to the Eurozone at first opportunity.

Has the time come to join the Eurozone?

Danish Institute for International Studies
The global financial crisis has been of particular importance in Denmark because of its small, open economy and its exposure to global trade and investment. Related to this, Denmark’s economy, like that of the UK, tends to be further ahead in the economic cycle compared to the rest of the EU. Denmark was the first EU economy to enter technical recession in the 2nd quarter of 2008 and spent much of 2008 in recession.[1] The vulnerability of the Danish economy, based on global exposure and inflated housing sector, had been identified in 2007 as one of the three most fragile housing markets in the world, with similar vulnerabilities in its banking sector – in mid-2008 the official foreign reserves of the Danish National Bank as a percent of GDP were only about 10 percent (less than Iceland’s).[2]

State interventions are believed to be harmful

Czech Republic
Institute of International Relations
The Czech banking sector has so far remained rather immune to the turbulence caused by the financial crisis, thanks to a more conservative approach to loans by Czech banks, which in turn is a consequence of the Czech banking crisis in the 1990s. Therefore, the Czech Republic was not seriously hit by the first wave of the financial crisis. The aftermath of the financial crisis, however, has also affected the Czech economy, with a slight increase of unemployment being the first evidence.
The Czech Presidency has chosen the slogan ”Europe without Barriers”, and this is also the Czech recipe for how to deal with the financial crisis. The Czech government warns against protectionism and other potential interventions into the free market which could arise as a reaction to the current crisis. Furthermore, the government emphasises that the EU countries should not loosen their fiscal discipline as a consequence of crisis packages meant to stimulate the economy. Increased budget deficits can, according to the government, have serious consequences for the European competitiveness. Therefore, among others, the EU finance ministers should stick to the goal of reaching consolidated public finances by 2012.[1]

Economic crisis hits Cypriot tourism and construction industry

Cyprus Institute for Mediterranean, European and International Studies
Cyprus felt the impact of the global financial crisis, however, at a lower scale than other EU member state economies. In October, the international credit crisis escalated significantly and the “Cyprus Stock Exchange” suffered its heaviest losses since 1999. At the time, Cypriot President, Demetris Christofias, in his intervention at the seventh EU-Asia Summit (ASEM) in Beijing, noted that the international financial crisis required fast and coordinated actions by all states.[1] Upon his return to Cyprus, Christofias stated that the Cypriot economy is not substantially affected by the crisis, while the country’s banking system still stands strong.[2] Minister of Finance, Charilaos Stavrakis, sharing the president’s view, also observed that the Cypriot economy will inevitably be affected by the international financial crisis, but because of its robust foundations it will be able to come out of the crisis much easier than other states.[3]

Mixed responses on the EU’s reaction and growing fear of recession in Croatia

Institute for International Relations
Croatia’s fears of recession and devastating effects of the global economic crisis
The intensive preoccupation of the Croatian public with the world financial crisis and its reflections on Croatia started in the summer of 2008. First reactions of government officials reflected the attempt to play down the proportions of crisis and its possible effects on the Croatian economy. It was hoped that the financial crisis would be limited to US financial institutions and its economy.
The autumn of 2008 brought the sobering up of and acknowledgement of the realistic scope of the threat and since then, governmental and public interest is primarily directed on the potential impact of the crisis to the Croatian economy as well as its accession process to the EU.

Strong focus on Eurozone leaves new members worried

Bulgarian European Community Studies Association
Many experts focused their attention on the repercussions of Brussels’ decision to block EU funds allocated to Bulgaria on the country’s economy. It had lost 220 million Euros in pre-accession funds, whereas another 500 million Euros were frozen. They pointed out that, unfortunately for Bulgaria, those coincided with the unfolding global financial crisis. Thus, the cash cut-off could never be compensated, especially in the context of the crisis-ridden world economy,[1] which aggravates the impact of all of these developments. Especially in such a difficult period, when the most serious sectors in Bulgaria were affected and many people were losing their jobs. Other Bulgarians were being thrown out of companies across Europe – for example in Spain or the UK, and had to return to Bulgaria.[2] However, the possibilities to create new jobs were reduced by the firm line of Brussels.

Criticising the lack of harmony in the European reaction

Centre d’étude de la vie politique, Université libre de Bruxelles

During the first days after the outbreak of the financial crisis, various Belgian political actors criticized the individual management of the events and the lack of harmony in the European reaction. The Belgian government expressed its dissatisfaction on this topic to the French President during the Eurogroup meeting on 12 October 2008. In addition, the Belgian Prime Minister denounced the lack of an answer from the EU at the beginning of the crisis, with the exception of the European Central Bank, while the parliamentary opposition particularly stressed the absence of the European Commission and of its President.[1]

The EU’s response to the financial crisis generally seen as mostly positive

Austrian Institute of International Affairs
The EU’s overall performance in reaction to the financial crisis is perceived highly positive, the president of the “Austrian Chambers of Commerce”, (“Wirtschaftskammer Österreich”, WKÖ) Christoph Leitl outlined the measures taken by Nicolas Sarkozy in France to fight the crisis and evaluated them as a way to follow.[1] Another positive statement was made by the Member of European Parliament Andreas Mölzer from the Austrian Freedom Party (Freiheitliche Partei Österreichs, FPÖ), he stated that the Euro had proved itself during the financial crisis.[2] He also hoped for the European Central Bank to continue its work in the present way and for the Euro to behave as a shield against international financial gamblers.[3]
Former Chancellor Wolfgang Schüssel, stated in a press release that Europe’s reaction to the financial and bank crisis was right and very ambitious. He also emphasised that Europe had proved of being capable of acting properly in such critical situations.[4]

[1] “Leitl: ‘Sarkozy hat gezeigt, wie es geht.’”, Die Presse, 30 December 2008, available at: (last access: 17 February 2009).

[2] The FPÖ represents the right wing and national interests and is highly EU sceptical.