European governments must not underestimate the political cost of the Eurozone sovereign debt crises, EU Economic and Monetary Affairs Commissioner Olli Rehn told a high-level roundtable co-organised by Friends of Europe and The Financial Times. “This has been a political stress test, and will continue to be,” Rehn underlined, adding that the challenge was to deal with the “support fatigue” in some European countries and the “reform fatigue” in others. US Ambassador William E. Kennard said the EU should develop a “counter-narrative” which highlighted the benefits of the euro to challenge Eurosceptic arguments. Participants discussed the future of the G20 and calls for further reform of the International Monetary Fund, including suggestions that the next Managing Director should be from emerging countries rather than Europe.

Below is the executive summary of the report, highlighting particular outcomes and future recommendations that were a result of the roundtable discussions.

To see photos of this roundtable please visit our Flickr gallery (bottom, right).

A roundtable discussion honing in on the genesis and the consequences of the financial meltdown of 2007/2008 and subsequent sovereign debt crises in Europe was held in Brussels on 19 May 2011. EU and US officials, politicians, regulators and members of the industry gathered to reflect on the lessons learned during the process, in order to draw conclusions on how to avoid future critical scenarios. The talks are part of a wider effort by Friends of Europe to bring together experts in the field of finance to share ideas on how to build lasting, strengthened global economic governance.

Two overarching themes were discussed during the roundtable: the first focused on the recent European debt crises. Subsequently, participants examined the current international governance architecture, highlighting the strengths and weaknesses of bodies such as the G20 and the International Monetary Fund (IMF). The debates coincided with the resignation of former IMF Managing Director Dominique Strauss-Kahn, which sparked a discussion on who should be his likely successor.

Most participants appeared to agree on the reasons that lead the Eurozone into a double-crisis, although opinions remained divided on how much has been achieved to date to help the Union get back on its feet. While it is clear that crucial political steps have been taken to restore stability, including the bailouts to three member states Greece, Ireland and Portugal, participants expressed concern that more concerted measures were needed at a time when the political will to act as a unified group of countries is not at its highest. Regardless of any further measures that need to be taken, new regulations put in place over the last year aimed at monitoring the financial sector should put Europe back on track, if properly implemented and enforced, it was concluded.

The talks also touched on the consequences of the crisis for the European political project, especially its acceptance by citizens. It cannot be denied that the crises have put pressure on the political elites to better communicate with citizens to avoid losing popular support. In this context, the perceived surge in eurosceptic sentiment in countries which have been asked to support failing member states was debated. As pointed out during the sessions, politicians should learn with the present experience, so that in the future they keep the taxpayer – which ultimately has to foot the bill for the economic downturn – better informed. It was also suggested that there is a lack of supporters of a more positive narrative on Europe, who failed to counter anti-European Union activists’ voices.

Discussants then moved on to examine how a global economic governance system could look like.

The role of the G20 was discussed, which highlighted a cleavage in the opinions over the body’s real success rate. While some lauded world leaders’ achievements within the context of the G20 (most notably the increase of the IMF’s funds agreed in 2009), others thought that the rate of international cooperation through it had stalled more recently.

Through the talks, it emerged that international agreements and cooperation were key to global stability, because economies are more linked than ever. However, participants stemming from different parts of the globe noted certain measures had to be taken within national borders, even though the impact of inaction could be felt elsewhere too. In sum, it became clear that governments’ decisions bear an impact on other countries’ economic reality, yet, trying to find single solutions applicable to all might just be an impossible task.

More concretely, panellists voiced views on who should be the next IMF leader. The majority pointed out that merit should triumph over other considerations, such as origin. Nonetheless, some insisted that perhaps it was time for an expert from an emerging economy to head the institution.

Considerations on the nature of future crises were also floated, and it was concluded that these will likely happen again. Furthermore, it is probable that subsequent crises would affect the entire globe and not spare regions previously sheltered. The question now is whether governments will be prepared to deal with financial turmoil in a swifter fashion.

The debate was rounded up with a warning that the next crisis is already looming. Its exact contours are impossible to tell for the time-being, however, it could find its origin in collapsing trade negotiations, a competition for scarce resources, environmental degradation and a quest by poorer countries to improve their life standards and position in a globalised world order.