Pragmatic U.S. and China versus chaotic Europe

Two-hundred high-level U.S. officials are in Beijing, meeting with their counterparts to discuss a wide-ranging issues from currency to human rights. A sense of pragmatism seems to prevail over anger and finger-pointing.

Both countries have produced bold monetary and fiscal policy responses to comeback the global financial crisis that started in the U.S. As the result of their actions, the economies in the U.S. and China are recovering and providing the support for the global recovery.

More pragmatic, coordinated or joint actions will be needed, to deal with issues that arise from bilateral and multilateral trades. The economic interests of these two leading countries are too-intertwined and too influential to leave them under the emotional influence of sometimes over-blown protectionism.

In contrast, Europe seems to be in chaos. The ECB is consistently behind the curve in dealing with macro crises. This article from the Big Picture has a good summary of the main problems that need to be tackled by European leaders.

Greece's sovereign debt problem must be dealt with as what it is: The country is insolvent; both the Greek and the banks who have lended to them must live with the consequence. Debt restructuring should be done sooner rather than later.

Germany as a big exporter, is benefiting from the depreciation of Euro. As the leader of EU, it should act to provide stimulus to the regional economies.

The lessons from the U.S. and China is clearly that the central bank must act bolding to promote market confidence in the financial system. The fate of the Euro and the ECB are tied up with its member countries. Independence does not mean inaction.

We hope that pragmatism will also prevail in Europe.