Former ambassador, Fisher finance professor discuss EU debt

Published: 2013-04-01

In the wake of the recent banking crisis in Cyprus, former U.S. ambassador to the European Union Kristen Silverberg questioned if Europe’s economic integration is serving its foundational purposes. 

“It’s hard to be very excited about where we are today in Europe,” Silverberg said at a panel discussion last week inside Schoenbaum Hall. “We have seen now the imposition of capital controls within the euro zone, which is a violation of one of the core founding principles of the EU.”

The discussion, which included Fisher’s Michael Brandl, assistant clinical professor of finance, was co-sponsored by Fisher’s student organizations the Undergraduate Finance Association and the business fraternity Alpha Kappa Psi with the Alexander Hamilton Society at Ohio State.

“It was a great opportunity to get multiple, expert perspectives on a critical issue,” said Fisher junior and UFA President Alex Wittenberg, who noted that the event complemented recent discussions on the debt crisis in his international business course. “It’s one of the most important events of this century, so it’s highly relevant and something that students in all aspects of business would benefit from hearing.”

Silverberg used the example of the current crisis in Cyprus to illustrate her concerns. Because of the controls being imposed on Cyprus, she said they will encourage capital flight from the region and undermine the credibility of previous EU interventions on the crisis. Singling out the high debt in Greece and Italy, she identified sovereign debt, the lack of growth, contracting economies (excluding Germany and Ireland) and future economic competitiveness as the major problems in the euro zone.

All of these issues can have a major impact on the United States because European countries are this nation’s closest strategic allies and economic trading partners, Silverberg said.

Brandl, a finance scholar, gave analysis from an economic view. He agreed with Silverberg that the post-World War II U.S. policy to support a unified Europe was a sound idea from a diplomatic standpoint. However, from an economic standpoint, the system is flawed.

“Economists understood that politically, it was necessary. But we warned you can’t just push a bunch countries together, give them one currency and think it’s going to work,” Brandl said. “You can’t take economies that are different, put them together and think that somehow they will become economically unified.”