“I would not be too pessimistic. Solutions will be found in the end, even if they are last minute decisions and a great deal of money will have been lost in the process, further weakening economies,” said Pascariu.
He added Germany cannot afford to leave the euro area, since this would be the equivalent of burning its bridges to exports.
“There will not be a catastrophe. I know I am making a somewhat exaggerated comparison, but as the Hiroshima bomb prevented nuclear warfare, the Lehman Brothers crash prevented collapse in the global financial system. This does not mean there will not be other banks wiped off the map, but I don’t believe we will see other bankruptcies to cause such shockwaves,” said the banker.
Pascariu, 61, has a banking background spanning across the communist regime, the transition period and the economic boom that followed. He admits that a stance where banks relax thinking they will be bailed out is unhealthy, but oversight authorities need to do their jobs properly.
“It is in the nature of the private sector to take chances, but it is also the job of governments to safeguard public interest. As such, this equation needs another two strong pillars – governments and civil society, because in the end this is not a governance problem and it does not refer strictly to regulation and enforcement.”
According to Pascariu, governments and supervisors need to bring in highly skilled professionals, with a high degree of credibility, and who can keep up with the market. Right now, the banker adds, people keep saying leaders are no longer what they used to be, and they are unable to enact quick and viable solutions under pressure.
For more than a year now European leaders have kept trying to reach common ground on decisive measures to solve the crisis, while markets keep their fingers crossed with every top-level reunion, and leave disappointed by the lack of progress.
“In the end, the current situation is also the result of poor balance between the strengths and weaknesses of democracy. Far be it form me to plead for a Chinese-like system, but it is clear that China’s progress and its edges stem from a decision-making process where debates are fewer and things move faster. Decision-making speed is crucial in such times,” Pascariu said.
The former leaders held more power, they could even command the political structures they ran, they imposed more respect and they had more room for decision.
“Today, things have grown complicated, there are more levers, there is more democracy within parties, power is wider dispersed and the enactment of a decision takes time,” the banker said, adding the world is no longer simple, but it is not a victim of its own sophistication either. When problems appear, solutions gain exponentially in complexity.
Like many other observers and commentators of the crisis, Pascariu notes a fundamental element: “Westerners have a very tough time accepting the idea that over the past several decades they have lived beyond the real means of their economies, they have kept postponing structural reform and kept accumulating debt.”
Now it remains to be seen how long it takes for the West to realize this fact, how willing it is to adjust, at what cost and whether it has the political will and strength to drastically slash public spending.
(English version by Andrei Circhelan)