The EPP solution

The European Summit continues to meet today to find new ways to kick the financial can down the road as part of the extend and pretend (EPP) masquerade of stabilising the euro-zone and saving us all from recession or worse. More summits are our only guaranteed Christmas presents as markets continue to move sideways.

Smart companies will need to factor in a rising rate of market volatility, rising domestic consumer and business confidence, but stalling expectations of the focus on finding a way out of the European crises. The meeting of the minds at today’s summit will lead to greater fiscal controls and efforts to re-establish confidence in the euro and the euro-zone and attract funds into a bond issue to bail out the sovereign wealth funds that were yesteryear’s big hope.

In the cosy world of the European central banks it is a case of German Chancellor Merkel playing the queen, the French President Sarkozy playing the king and British Prime Minister Cameron filling in the role as the fool. It really is the case that in the world of blind follow the leader as the one-eyed head of state becomes sovereign.

We will all have to wait until the third week of next year (January 20) to learn the extent that the ultimatum issued by Merkel and Sarkozy have enabled the European Central bank to lend short-term credit notes in place of selling long term Eurobonds. This week’s summit, or is it this weak summit, will once again fail to put together a unified European financial structure that would look anything like a USE (United States of Europe). 

David Cameron has threatened to veto any new restrictions on Britain’s financial sector as a condition of signing up to the deal which will be hammered out at a summit tomorrow, but still insists that the UK must be included in any new treaty which aims to resolve Europe’s debt crisis.

It is widely understood that the British Government is split on where to go next, with reports Cameron is facing demands from at least five senior Tory ministers, including two in the cabinet, to set out how he will negotiate a far looser medium-term relationship with Europe, possibly in a white paper. His ministers are reported to have accepted that Cameron regards the potential collapse of the euro as too important to demand a massive renegotiation at this weekend’s summit. Hence the continuation of the EPP process to buy time if not credibility.

At home, the delayed decision of our major banks to weave a path between public hostility and shareholder expectations by passing on the full RBA interest rate cut means that small business is going to face even closer scrutiny and tough love when seeking funds for inventory and short-term growth. This is already to be seen in the slowing of new full-time job creation and the fact that there are still more than a million unemployed and underemployed according to Morgan Research.

The good news from Gary Morgan is that there has been a very small rise in consumer sentiment in the last week as Australians show more confidence in the Australian economy over the next 12 months and in their own financial situations over the next 12 months.

Australians’ are more confident about their personal financial situations this time next year with 40% (up 5%) saying they expect their family to be “better off” financially (the highest since May 7/8, 2011) and 20% (down 3%) expecting to be “worse off”.

In this environment success lies in getting on with the processes of extension into emerging markets, investment in productivity enhancement through improved workplace relations rather than conflicts over industrial relations and high levels of personal engagement with customers and their customer bases.

Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.