Last week, German Chancellor, Angela Merkel seemed to echo the sentiments of John Donne when she said; “if the euro fails, then Europe fails.” Even if you’re not familiar with John Donne’s meditative quote, “No man is an island; entire of itself every man is a piece of the continent…” I think you can easily see why his ruminations on the interconnectedness of man might seem appropriate in relation to today’s highly integrated global economy. After all, today no currency is an island either.
Right now, the world is precariously balanced between recovery and a second wave of crisis. The upheaval surrounding the Greek debt crisis and the potential spread of economic collapse to other sovereign states in the Euro-zone, may be the final weight that tips the scale between the economic models of the past and those of the future.
So it is interesting to say the least, to read a headline about the Greek debt crisis and its potential to spread as a “ring of fire.” Although this description is definitely not based on Johnny Cash’s ode to falling in love ”Ring of Fire“.
It is unfortunately, about the very real possibility that Greece along with several other Europe an countries will not be able to refinance their near real-time debts even with the support of sponsored bailouts. A fact, which if proven accurate, could mean that the recently celebrated 10 year anniversary of the Euro might be its only one. But since other countries in this ‘ring of fire’ include France, the U.S., U.K and Japan, and not just the rest of the PIIGS (Ireland, Italy, Spain, Portugal), it’s easy to see that this problem goes far beyond whether or not the EURO survives,
While recent moves in the global markets have created and continue to reflect uncertainty, it is far too early to put a nail in the euro’s coffin. It is however, time to think about further standardization of practices and technologies used to assess risk and monitor debt and liquidity across governments. After all, we have adapted to create and enforce business-to-business (B2B), business-to-consumer (B2C) and business-to-bank (B2Bank) standards, isn’t it time technology also be used to enable government-to-government (G2G) ones as well?
One of the biggest issues that has been highlighted by the Greek debt crisis is the ability of one member nation to circumvent the spirit of the rules of the EU if not the letter of the rule. Because each nation is sovereign, there has long been a kind of “gentleman’s agreement” approach to the enforcement of the excessive budget deficit controls included in the original Stability and Growth Pact. While the act specifically limited budget deficits to 3 percent of gross domestic product, no one was actually checking for compliance. And even if someone wanted to verify the numbers, there was no central process or technology to do so.
In this instance, the fact is ”trust but verify“ just didn’t work. There may have been plenty of trust in the beginning, but as we can all see there was little or no verification (hello Greece admitted it massively understated its budget deficit) over the years and now it may be too late. But if you’ve read pretty much any of my previous posts you know that I am truly a glass half-full person and I believe that adding or at least increasing government-to-government (G2) transparency is not an insurmountable obstacle for the EU. Provided of course, that the EU actually wants it.
In the ten years since the euro became a reality, technology has changed significantly. Where once a call for government to government transparency might have required that all parties relinquish some sovereign control, today–thanks to technology–they can work together to establish standard practices and processes to format and share information. With an agreed upon technology enabled system, governments could work across borders electronically to ensure financial accountability without opening every facet of their sovereign budgetary process to outside examination. After all, if technology can connect two or more corporations, allow them to exchange specific data that helps to not only validate their relationship but mitigate the risks of doing business; shouldn’t it be able to do the same for governments? Is a government bureaucracy really that much more complex than your average multi-billion dollar (or euro) corporation?
Technology excels at helping organizations to collect, exchange and distribute data from disconnected sources. The same governments that agreed to form the Euro zone could just as readily make the decision to invest in technology that would allow them to do the same–i.e. create an interoperable framework based on agreed upon data segments to ensure accountability, increase transparency and mitigate risks. While technology would not, in and of itself, create a complete solution to the issues facing the EU as a result of the debt crisis, it would be a solid starting point to prevent a similar reoccurrence. Because by utilizing many of the same pillars of standardization that have allowed businesses and financial institutions to monitor, measure and report on performance, governments would be able to increase collaboration without detracting from individual sovereignty. Of course, it’s just a suggestion. A suggestion that requires not only technological integration and oversight but also a commitment to transparency. Given the history of the Euro zone countries to breach existing rules, it will be interesting to see which of these–transparency, integration or collaboration–will present the biggest hurdle.