Abu-Ghazaleh Expresses Concern over the Gravity of Global Economic Situation

04 Oct 2011  

I Call for Establishing an Organization for Arab Capital-Exporting States-Abu-Ghazaleh

AMMAN ---October 4, 2011--- HE Dr. Talal Abu-Ghazaleh, Chairman and CEO of Talal Abu-Ghazaleh Organization (TAG-Org) warned of the serious stage undergone by the global economy and called for urgent awareness raising of public opinion in the Arab world.

“When the global financial crisis erupted, I expected that the global economy will move to a deeper real crisis, an economic crisis which will be followed by the social crisis which shall be even more serious," he addressed reporters during a press conference.

Dr. Abu-Ghazaleh anticipated growing calls for overthrowing the economic system in the Western world and Europe in general by 2012.

Dr. Abu-Ghazaleh focused on the global economic crisis, where he indicated two tough options:
First: Reduction of public debt and budget deficit which will lower the quality of services provided to citizens.
Second: Continuing luxury to which citizens are accustomed to, which results in complete bankruptcy of state.
This would pose a problem to the Western banks and would lead to the so-called accumulated inflation in economy. In this respect, Dr. Abu-Ghazaleh referred to the photo published on the cover of the Newsweek magazine which included an upside down photo of the Capitol Hill along with a statement of how great powers fall. He also pointed out the cover of the Time magazine entitled the collapse of European market.

Network of Loans
Dr. Abu-Ghazaleh tackled the European loans network and made clear that Italy owes France more than half trillion, one fifth of France's GDP and owes one trillion and a half to other European countries. Spain also owes more than one trillion to European countries.
The budget deficit of most main countries in Europe amounts to 10%. Once again, Dr. Abu-Ghazaleh emphasized "we are experiencing very serious stage as budget deficit and public debt exceeded 3% of the GDP, such as in Italy 23%, Ireland 32%, Greece 11%, UK 11%, France 8% and Sweden 55%."

In addition, all these countries have exceeded the public debt which is supposed not to exceed 60% of the GDP. The debts of G7 also exceeded their GDP (nearly 70%) such as Japan 225%, USA above 100%, UK 94%, France 100%, Italy 130% and Germany 85%.

He said that the American public debt increased during the US former president Bush era from nearly five trillion to ten trillion (dollars), and in Obama’s era to around $15 trillion. If we add social security ($8 trillion) and health insurance ($38 trillion), the total becomes more than $62 trillion. He also recalled Obama’s statement that the recovery of US economy is dependent on China and Asia.

Search for Alternatives
Dr. Abu-Ghazaleh added that the collapse of Western economy leads to the search for alternatives and we are one of these alternatives, although it is not in our interest for that to happen. There are a lot of suggestions, how does the West save its economy? We must perceive what is happening because it affects us and our economy must benefit from the current economic crisis, which is a significant opportunity.

He stressed that the economic thrones started shaking and the European currency will not survive unless pegged to the dollar. He also said that loans will not solve the problems of Greece, but rather the solution is in reform.
Regarding the current stage, Dr. Abu-Ghazaleh said that we moved from corporate bankruptcy (financial crisis) to state bankruptcy (economic crisis), i.e. from private to public. This is the danger when the state becomes unable to provide services to citizens, which we call it the third stage, i.e. social crisis.

He emphasized that we are facing a real not just present problem, as there is no solution for the global economic crisis because all Western countries are affected, except Germany as it did not follow the western policy of complete liberalization. Moreover, Germany applies the free capital system supervised by the state, while other Western countries suffer from debt and budget deficit reduction as well as decreased services provided to citizens or declare their bankruptcy and then establish new systems.

What is the Solution?
Dr. Abu-Ghazaleh answered the inquiries about the solution saying that centers of research and studies still examine the matter, and there is a problem before the world leaders in facing their people (budget deficit is growing, and public debts accumulate as they attempt to make additional solutions).
He said that we are part of the problem because Western countries search for solutions (surpluses, markets… etc).
He added that the world system has gone and we moved to bilateral relations, and the states structure will differ indicating the statement of former president of the World Bank that G7 will become part of history.

Economic Reforms in Jordan
As for Jordan, Dr. Abu-Ghazaleh stressed the significance that economic reforms be implemented in parallel with political reforms. He said that as long as we are finished with the political reform and His Majesty approved the amendments, we are in need now for quick economic reform and we are able to start this process using the available competencies in the country.
He added that we are now undergoing a historical stage in the Arab countries that we should make use to prosper. We constitute a market and exporter of capital and investments. The world does not vanish but rather empires do and new ones appear instead. We are moving in a stage that leads us to a new era, and he inquired where we will be in such an era?
He concluded by saying that the Western world shall face radical developments and the whole global system is in suffering. We should decide how to make use of these challenges and opportunities.
In response to a question on Arab investments in the Western countries, Dr. Abu- Ghazaleh called for establishing an organization for capital-exporting states in association with other states to provide appropriate protection for such capitals, in order to avoid what happened at the beginning of the financial crisis due to the economic situation.