Thank you. I am honored to be a part of the 22nd Global Summit of Women, and I am especially pleased that conference organizers chose Athens as the location for this year’s summit.
According to the OECD’s latest Economic Outlook, the global economy is gradually gaining momentum, but the recovery is fragile, extremely uneven across different regions, and could be derailed by what nearly every global outlook will tell you – the eurozone remains the single biggest downside risk facing the global outlook.
With slow growth, high unemployment and limited room for maneuver regarding macroeconomic policy space, structural reforms are key means to spur growth and boost confidence.
Recently, World Bank President Robert Zoellick said, “All countries need to focus on the structural reforms – the microeconomic policies – that will drive future growth.”
Such changes are essential to enhancing productivity, competition and innovation – whether it’s so that Europe can regain its economic performance, or China can avoid the so-called “middle income trap.”
Nevertheless, the mixture of low growth, aging populations, structural inefficiencies, and high government debt load is giving policymakers difficult choices to make to try to balance fiscal restraint with growth-enhancing measures.
Finding a careful balance between spending cuts and revenue increases is critically important. The reform agenda must also be specifically targeted at supporting employment, reducing inequalities and protecting the weakest segments of the population.
My country is not immune to this dilemma. We too face the same choices.
I have been asked to speak about post-crisis Europe but it is difficult to speak about “post-crisis” Europe when we remain very much in an emergency response mode. Thus, I’d like to discuss some trends apparent in Europe, which will need resolution for the crisis to end.
Economic Trends: Europe and Global
A stable, growing European economy is essential for a thriving global economy.
Europe has taken significant steps to manage its financial crisis, but there is more work to be done.
Business confidence has continued to deteriorate in the eurozone. Confidence in the financial sector is also eroding. Government debt sustainability is one concern that is pulling down market and investor confidence in the region.
Recent Eurostat figures illustrate some of the other underlying issues. In the first quarter of 2012, overall GDP growth in the euro area was flat at zero percent. That aggregate figure masks a widening divergence in performance across the 17 countries in the eurozone.
Germany boasted growth of 0.5 percent while the others such as Portugal, Spain and Italy, all posted negative growth figures.
Some have called Germany “Europe’s engine for growth,” but it is not the only one. Baltic and Nordic countries report strong economic growth. Turkey and Poland also have positive GDP forecasts.
Within the eurozone itself, imbalances make it hard for less competitive countries to keep pace with the more competitive ones. This is one of the reasons why Spain, Italy, Greece, and others have struggled in recent years. Economic, fiscal, and financial imbalances within the eurozone have become even more pronounced since 2010. Recovery in the same countries has not been sufficient to pull other s with it.
Job creation is expected by the IMF and other forecasters to remain “sluggish” in 2012. This can create a vicious cycle, as the unemployed will need more income support and retraining or skills development assistance, resulting in a further drag on already limited government resources.
Interestingly, Spain has the highest unemployment rate in Europe at 24.1 percent and the highest unemployment rate among youth age 15-24 at an astonishing 51 percent. Spain also had the highest proportion of early leavers from education and training at 28 percent.
Of additional concern is the deleveraging of banks in Europe. In an effort to improve their balance sheets, many banks have restricted lending. By tightening access to credit, entrepreneurs and small-to-medium enterprises have fewer options for financing. This, in turn, further stymies growth prospects.
All of these elements feed into the ongoing debate about austerity versus growth. We continue to believe it is not an “either/or” discussion, but rather should be about a balanced approach.
There is an emerging consensus that more must be done to promote growth and job creation. There was a deep and productive discussion of this at the recent G8 Summit we hosted. Focus has returned on a key element of any sustainable solution – growth – needs to be balanced with fiscal consolidation efforts.
The challenges to economic growth, including in the U.S., have brought a fundamental shift in priorities for U.S. foreign policy. Economic issues, economic power is just as important as political and military power. What happens in board rooms, what happens in key negotiations is just as important as defense discussions. We call this job diplomacy. It is about using the tools of diplomacy abroad to support trade and the rights of investors, leverage the strengths and expertise of the private sector in our economic engagement overseas and use diplomacy and our overseas presence to grow our economy at home and foster development and opportunity abroad, most particularly for women.
The Secretary has directed that we incorporate gender issues in every initiative, every program of the U.S. across the globe with emphasis on support for entrepreneurship, recognizing that small-to-medium sized enterprises are a vital element of any economy. Here in Greece, the strength and vitality emerging from women and women business leaders will play a critical role in Greece’s economic recovery.
We view women’s participation in the economy as critical to a free and prosperous society, and we make it a part of our engagement with all countries.
Back in March, there was optimism that Europe had turned the corner and the crisis was near resolution. Unfortunately, recent events have again reminded of the fragility of our global economic recovery.
I hope we draw from the exchange of ideas at this Summit and focus on strengthening the fundamentals of the economy, invest in infrastructure, foster private-sector development, expand markets at home and abroad, and encourage new and “green” technology. We can each do our part to help make progress to upgrade our economies, especially focusing on key areas such as education, health, labor, taxes, innovation and better inclusion of women.