"Let's return to the grassroots and base growth on savings and productivity"

Posted in Europe | 17-Jul-09 | Author: Jerzy Buzek| Source: Europe´s World

Jerzy Buzek

Europe needs to get back to the grassroots of its market economy and base its economic growth on savings and productivity. EU governments should be careful about the future effects of their actions. By lowering interest rates and injecting money into the economy, governments can, to some extent, tackle current problems, yet in long term these actions can have the negative effect of risking high inflation, heavy debt servicing cost and therefore substantially increased taxes.

What we need is to recreate the sort of institutional framework that will ensure confidence in the system. Markets have to be based on principles of transparency and have a regulatory framework that is understood by all. Instead of being at the heart of the economy, the financial sector ought to be ancillary to the real economy.

This crisis may yet turn out to have a beneficial side, in that it makes us understand that a business may be worth more than the price of its stock. We have to encourage a new philosophy of financial rewards that is not based on short-term gain but on sustained growth and long-term contributions to the economy.