During Pershing’s INSITE 2011 conference in Hollywood, Fla., this week, Gordon Brown, the former prime minister of Great Britain, told attendees that Greece’s economic trouble is a European problem, not a Greek problem, and the only solution is to get all of Europe’s leaders together to address the three underlying causes. The causes they need to address are Europe’s fiscal crisis, its banking problems, and its growth problem, he said.
European leaders need to remove the danger that comes with undercapitalized banks, he added. In the aftermath of the crisis, Europe’s banks have been weighed down by losses related to their exposure to the U.S.’s subprime real estate. They’re also weighed down by the debt of Greece, Ireland, Spain and Portugal.
To prevent another banking crisis, Brown believes we need to put in place minimum global standards for banking capital ratios. In addition, incentives for key banking executives should be based on long-term performance, not short-term performance. There’s got to be a balance between incentives and the risk created by bad behavior, he added.
As a result of the problems with the euro, the core of Europe will find it hard to sustain growth going forward, he said, and Asian markets will rise to dominance. The middle class should double in size over the next 10 to 15 years in emerging markets such as China, India, Brazil, Russia and Africa, he said.
For the U.S. and Europe, this growth represents an opportunity. If we’re going to succeed in the future, we’ve got to get into these markets and sell our goods, Brown said.
Unless China builds up its own middle class, there will be an imbalance there, he added. China is doing too much production for exporting and not enough to meeting consumer demand in its own economy. If it opens itself up more to western goods and services, this could be key to creating more jobs for the U.S. and Europe, he added.