Strategic Panorama 2009 - 2010 - IEEE

The global recession and its impact on international economic relations
coupled with the existence of global economic governance institutions
and the progress (albeit still timid) of multilateral cooperation, are making
it possible for the economic situation to begin to improve.
According to the estimate of the International Monetary Fund (IMF),
most of the world’s economies could be growing in 2010 and, what is
more, the emerging economies would do so at a much faster pace than
their advanced counterparts. If these forecasts are confirmed, the countries
will have avoided succumbing to the protectionist temptation that
brought such disastrous results during the Great Depression of the 1930s.
In short, the determined action taken by the authorities appears to have
prevented a new economic depression, and the likelihood of outbreaks
of social strife and political instability in the most economically vulnerable
countries will be significantly smaller, which could improve the international
security outlook.
A different matter is that the advanced countries may well have to get
used to living with much lower growth rates, higher levels of public debt
and slower job creation rates than in the past. What is more, they will need
to come to terms with the fact that the crisis will speed up their relative
economic decline, forcing them to hand over a certain amount of power to
the emerging countries in international economic institutions.
This context raises major economic policy debates that particularly
affect the European Union and Spain. On the domestic front it is essential
to design strategies for combating the crisis in the monetary and fiscal
areas. In the former, it is necessary to gradually reduce surplus liquidity
in order to keep inflation at bay. In the latter, public debt needs to be
reduced in the medium term so that current levels of indebtedness do not
push up long-term interest rates or hold back growth but ensure that the
European social model is sustainable even if it requires reforms. It should
furthermore be borne in mind that to the public debt increase triggered by
the crisis should be added the greater indebtedness we will witness over
the next decade as the baby-boom generation (those born between 1945
and 1975) reaches retirement age.
On the international front the European Union needs to find mechanisms
for increasing its influence in the world at a time when the emerging
economies are gaining ground on it. In this context the possible decline
of the dollar as the only international reserve currency could signify an
opportunity for the euro area. However as it is unlikely that the euro will
replace the dollar as the hegemonic currency, the only option that remains
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