Europe Must Focus on Value Creation

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This first crisis in the euro zone has shown that national interests can, and will, converge when spillover (or worse, domino) effects come to pass. These effects were observed in the newly named PIIGS countries—not a particularly charming designation for Portugal, Ireland, Italy, Greece, and Spain—just days before the summit of EU leaders agreed on an action plan. And it's worth bearing in mind that not only euro zone countries are suffering from fiscal problems. The U.K., which retains its own currency, has a debt-to-GDP ratio approaching that of Greece and a budget deficit ratio higher than those of France, German, and Portugal.

Valuable Comparisons

European leaders tend to wait until the last minute to compromise when it comes to risking the current order in the EU, and until now they have been effective mainly in creating value (or preserving it), though often desperately late. More preparation would be useful to sustain European-scale values.

The measure of per capita GDP demonstrates the positive effect of economic value creation. Comparing those figures for many countries at the time they entered the EU vs. a decade later speaks for itself: In the 10 years after it joined the EU, Austria's per capita GDP grew 23.4%, while Portugal's jumped 90.5% and Spain's a remarkable 149%. This value creation is also perceived by European business leaders. The current business confidence index is rising again, despite the fiscal crisis, both in the euro zone and the EU as a whole, although it had been in free fall during the global crisis of 2008.

Other fundamental values are also upheld by EU members. These are peace, the deeply rooted belief in unity through diversity (which remains, by the way, the EU's motto), political stability through economic collaboration, and a pride in the politico-economic, social, and legal achievements of European integration. Those values are maintained and consolidated with each EU enlargement.

Greek-German Value Creation

Many of those values become the norm. They are deeply anchored in today's European context. Their effects for citizens are numerous, including ease of travel, study, and employment throughout Europe. The single market is at the root of EU-wide harmonizations for goods, services, and collaboration on the environment and many other challenges. It is more efficient and effective to work together than separately—or worse, in isolation.

For businesses, Europe extends companies' home base, creating value in an increasingly knowledge-driven economy. For this reason, it is simply not in Greece's interest to spoil relations with Germany. Germany is the primary exporter to Greece; it is also its primary source of foreign direct investment (FDI), which brings about positive effects on infrastructures and employment. In addition, Germany is the primary market for Greek exports, accounting for nearly 10% of the total. The relationship is reciprocal and a boost for international trade. This is only one of the 27 examples of bilateral and multilateral value creation in the EU.

So here we are, in an era of heated discussions and disagreements, desperate attempts to save face and, at times, opt-out of the general modus operandi of European crisis management. But in the end, for 60 peaceful and prosperous years now, a compromise preserves the union. Europe, despite its scenes of internal disagreement, will not allow disintegration to happen. It will remain a model that achieves its competitive advantage from value creation—and diversity of values.

Suder is Professor of International and European Business and Associate Dean at SKEMA Business School.

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