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EU economic recovery may take 5 years: Klöckner’s Rühl

Keywords: Tags  American Iron and Steel Institute, Metals Service Center Institute, Klöckner, Gisbert Ruhl, European union, recovery, corinna petry

COLORADO SPRINGS, Colo. — The European Union is going to have a very difficult time recovering from its sovereign debt crisis, banking crisis, structural crisis and competitive crisis, according to Gisbert Rühl, chairman and chief executive officer of Duisburg, Germany-based Klöckner & Co. SE.

"The importance of the European Union globally has decreased with the rise of Asia, especially China, and the collapse of the European Union has an impact for the economies of the U.S. and China," Rühl said at the American Iron and Steel Institute (AISI) and Metals Service Center Institute (MSCI) joint annual meeting in Colorado Springs.

There is a battle between the more prosperous northern European countries that are pushing austerity measures—specifically lower public spending and a departure from a history of subsidizing labor without gains in productivity—and the southern European countries whose political leaders think they can spend their way out of recession, or at least long enough to be re-elected, Rühl said.

In Spain, "public expenditures on wages were increasing and productivity went down," he said. In France, the public sector accounts for 57 percent of gross domestic product.

Other European nations, especially in the northern half of the continent, "kept up with reforms to keep labor costs under control, and with this increased productivity and competitiveness.

"The difficulty is to find the right balance between necessary austerity measures on one side and public spending to support recovery," but Rühl believes "pouring more and more money into an inefficient system will not work."

Structural reform to achieve competitiveness again would require the eurozone to have a "common fiscal policy of budgetary discipline and strong integration and, finally, banking reform. It is extremely difficult to achieve because member states would have to give up some part of their autonomy," Rühl said.

"To come out of the mess," he said, Europe needs responsible political leadership that "will sort things out together. The qualification of European leaders has never been as bad as today. We hope rationality will win."

But even in the best-case scenario, Rühl predicts four or five years will pass before the E.U. can again achieve significant economic growth.

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