|Possible economic consequences of the events of 11 september 2001
|Towards a Mediterranean perspective.
The post-11 September world is an uncertain place. International priorities are now dominated by the overriding urgency accorded to security and the war against terrorism.
In such a context, attention may be focused on non-economic questions, but we should not forget that the potential economic impact of such questions is considerable. That is why the Euro-Mediterranean ministerial conference of 5-6 November 2001 commissioned this report on "The possible economic consequences of the events of 11 September 2001" on the Mediterranean countries which are taking part in the Barcelona process.
Six months later, what have we learned? Has there been a lasting impact on the interests of the Mediterranean countries? To shed light on this question, we first begin by describing the economic context in which the events of 11 September took place: the 2001 world recession and, more specifically, the fall-off in Mediterranean region growth. The problems now facing the Mediterranean economies were aggravated by the impact of 11 September and the instability it directly triggered, but they cannot be traced back solely to that one source.
Secondly, we point out the main economic effects of 11 September, distinguishing between immediate or short-term effects, which are likely to be temporary, and the more lasting long-term impact. Short-term effects can be further divided into direct (e.g. loss of revenue from tourism) and indirect (e.g. export stagnation or restricted access to financial markets). Longer-lasting effects are those which may affect the long-term growth potential of the countries concerned. They may be due to a number of different factors (e.g. increased risk-aversion in a climate of rising uncertainty; damage done to the image of certain countries in the region; increased military and security-related expenditure). What can we say at this point? The temporary effects have not been as serious as was feared in the immediate aftermath. Part of the impact has already been surmounted, thanks in particular to the fact that the recession in the United States and Europe proved short-lived. However, it is impossible to quantify the longer-term impact on these countries' growth potential. This impact may well continue to make itself felt, thus undermining possibilities for future growth, especially if foreign investment flows into the region were to undergo a secular decline. As a result, the need for economic reform policies to stimulate growth appears to be even greater than before.
Thirdly, looking at individual countries, we can see that the impact of the events was significantly different in different places. Six months after the events, we can identify three types of situation: countries which suffered a substantial immediate impact (Turkey and Egypt); those for whom it is more difficult to determine precisely what the impact was (mainly, the Mashrek countries and Israel), since the effects of 11 September 2001 would seem at this stage to be less significant than the impact of the resurgence of violence within the Middle East; and those which have managed to surmount the immediate/direct impact (mainly, the Maghreb countries).
Fourthly, we ask what lessons can be drawn from these events? Do our partnerships have a valuable role to play? The events of 11 September have served as a catalyst, unmasking the real issues confronting the region. The policies implemented in the wake of the Gulf War failed to address these issues, preferring to concentrate on purely financial questions. The real issue is the chronic failure of economic growth, which has led to rising unemployment and poverty. In the wake of the Gulf War, the main concern was how to solve the financial problems which stemmed from the region's massive debts. Now, we must address the fundamental problem of the region's chronic growth deficit. We thus recommend launching an active dialogue on policies to support strategies that will promote growth, investment and employment.
To this end, it will be necessary to recreate a climate which is conducive to productive investment, including foreign direct investment. This is the true test of whether or not the 11 September shock has been surmounted or not. This step is crucial, for the economic and social problems facing the region cannot be resolved without a sustainable improvement in economic growth. This in turn will require a higher rate of productive investment, and the development of a dynamic private sector.
We then turn to examine how we might pre-emptively encourage the reestablishment of investor confidence. We ask whether the Association Agreements and the area of shared prosperity which they aim to create can provide specific input to this end. In a region which suffers from escalating instability and insecurity, the Association Agreements have a major contribution to make to stability and to determining the region's vision of its future. The original purpose of the Agreements, which was to "facilitate" reform and "reduce" the risks inherent in transition, has never been more obviously relevant. This process must be promoted and accelerated if the Agreements are to serve their true purpose, namely, economic growth and employment, and thus help combat unemployment and growing poverty. In conclusion, we propose that the economic aspect of the Euro-Mediterranean process should be made to serve a genuine growth and employment strategy. This strategy should be built around five complementary pillars: sound economic policies; a more focused transition process; greater regional integration; more focus on how transition might be financed; and active policy dialogue with all the partners concerned.