In Theory: Arab lessons from the European crisis - By Mohammad Al Asoomi - April 28, 2011

Does the European economic crisis, and the consecutive European financial bailout campaigns, concern the Arab world, or in particular, the Gulf countries?
Through the campaigns, €275 billion (Dh1.48 trillion) was pumped into the European economy, which is suffering from a debt crisis. From the bailout, €110 billion was allocated for Greece, €85 billion for Ireland, and €80 billion for Portugal.
To answer that question, let's look at the British contribution to the bailout operations in the EU's Maastricht Treaty member countries. The UK is not a part of this treaty or the European common currency. This in turn led to a debate at the political and financial level with some opposing and some supporting Britain's contribution to the bailout campaign.
Both supporters and the opposition have their own reasoning on this matter. Britain, after all, is not a member of the euro group. However, the British economy is strongly and deeply linked to the European economy, which Britain relies heavily on for imports, exports, and financial and banking services, considering that London is the top financial centre in the world.
Therefore, the repercussions of the collapse of the European economy will not only affect the economy of Britain and other European countries, but also most world countries' economies, including that of Arab nations.
Symbiotic ties
This is due to many reasons. If Britain is dependent in many aspects on the privileges that it enjoys as an EU member country, then the destination of a large portion of the Gulf Cooperation Council (GCC) and other Arab nations' fuel exports is to European countries. Likewise, the GCC and other Arab countries depend on the EU countries to meet their need for advanced commodities.
Moreover, a huge portion of Arab and Gulf investments are in European markets. These investments maintained most of their assets during the European crisis, as opposed to the Arab investments in the US, which incurred huge outflows because of the global financial crisis.
This relation, that is based on mutual interest, is what mostly drives the direct or indirect assistance in financial bailout operations and provides the necessary aid during times of crisis.
If Britain's contribution to the operation was a direct involvement based on its obligations as an EU member, then the contribution and involvement of some GCC countries took an indirect approach as they pumped huge investments into the European economies, which were suffering from financial difficulties.
This indirect GCC contribution indicates the investment maturity of the decision makers in the GCC countries. Firstly, this approach aims to quicken the pace of growth in the European economy, which may result in lower oil prices and reduced oil revenues for oil exporting countries. These GCC investments helped reinvigorate some European economies. Secondly, some rare investment opportunities emerged in Greece, Ireland, Portugal and other European countries due to the global financial crisis and additional difficulties suffered by these countries, which means that investments made in them will yield very good returns in the future.
In this regard, Qatar is intending to invest $5 billion (Dh18.3 billion) in Greece alone, with Greece calling for facilitating Qatar's participation in infrastructure projects that are valued at €5 to €7 billion. Greece's President also pointed out that Qatar's investment paves the way for overcoming the crisis.
That this approach taken by GCC countries is correct is further proven by the fact that China Development Bank's has expressed its intent to invest in European countries that are suffering from financial difficulties, which indicates the large number of investment opportunities that are currently available from crises.
In addition to relations of mutual interest between various parties, there are many details that have increased the link between economies of the world in light of globalisation.
Economic collapses and difficulties are no longer limited to a specific geographic area, which adds a new aspect to the European bailout operation that far surpasses the issue of saving its common currency, the euro.
The bailout adds new content to the European currency that must be harnessed and utilised to achieve additional gains for the global economy. This can be achieved with the euro becoming a formidable competitive currency for the US dollar, which provides a more stable option for investors in the global market.
Dr. Mohammad Al Asoomi is a UAE economic expert.

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