Thoughts on the crisis based on the situation that has evolved in the European Union

The financial crisis that erupted in the autumn of 2008 and evolved into a global financial crisis at a terrific speed has transformed into a global real economic crisis at a similar pace. The whole of 2009 will surely be a year of crisis. The only question is whether the crisis will reach its lowest point this year, and recovery will start in 2010, or the global economy will be dominated by crisis events for two or three years. The answer to this question cannot be found yet with sufficient probability. Mainly because this crisis cannot be compared to the periods of recession that have been cyclically recurrent since World War II. This time recession in the real economy was triggered by the crisis of the financial sector. A crisis with such a background has been unprecedented in the past 50 years. Therefore, the number one question is when and how a financial sector capable of prudent lending and built on mutual trust among the banks can be re-created. The second question is what risk factors are implied in the crisis of the real sector – which has evolved due to the lack of loans – for the economy as a whole, and how this will affect the financial sector itself. Since in 2009 we are only at the beginning of an unprecedented crisis process, these questions cannot be answered with a single or unanimous answer. This would require brave speculations. However, it is inappropriate to outline such speculations in the spring of 2009, since such efforts are significantly affected by the economic views of the expert who predicts the scenario. It can already be seen that some of the liberal economists claim that this crisis is nothing out of the ordinary. At the same time, the opponents of liberal economics, which is marked with the name of Friedman, claim – with some adherence to the Keynesian philosophy – that this is the model crisis of the free market in the extreme sense of the word. Such preconceptions can be overcome only if conclusions can be drawn subsequently, on the basis of facts. At any rate, the fact that the governments have given and promised banks and companies rescue packages of several hundreds of billion dollars and euros within national jurisdictions, points to the fact that in such a situation only Keynes' recipes can be taken out of the bottom of the drawers. No other recipes have been prepared to date. The initiation of huge infrastructural investments by the governments from state resources also reveals methods based on an economic policy that emphasises the state's role in crisis mitigation. What has triggered the revival of this method of company rescue, which has not been applied for a long time now and has been declared unsuccessful based on the experiences?! In my opinion there is one reason: mass-scale bank bankruptcies have become imminent Primarily, because a bank with a century-old history went out of business in Wall Street. The banking sector has a prominent role in any market economy. With a bit of exaggeration it can even be said that the bank is the “eye” of the economy. Therefore, in the complex and developing market economies the necessary balance is eventually guarded by the banking system. Therefore, if the banking system becomes unable to maintain its normal functions, the market economy is also unable to function. And at the beginning of 2009 it cannot be stated that the entire banking system has surely been cleaned of bad debts. In connection with the crisis itself it causes a rather big problem that acceptable information is available neither about its course, nor its ending date. Therefore, the short- and medium-term forecasts should be reviewed with a strong critical stance. At any rate, it can already be seen that crisis management is carried out at member-state level, and many conferences are held in parallel, yet with rather modest results so far.