It’s the economy, stupid. This phrase in American politics was widely used during Bill Clinton‘s 1992 presidential campaign leading to Clinton’s victory against George HW Bush. Almost 17 years later, the famous US political slogan comes back to haunt a new global recession, which is also taking its toll on European countries. “It’s the economy, stupid, but also it’s people’s confidence in the economy, stupid. Because if you haven’t got confidence even if the economy is growing or even if the economy is not as bad as people think, if they don’t have confidence, then they will have problems,” Justin Urquhart Stewart, director at Seven Investment Management, told New Europe on February 28 telephonically from London.

When Clinton came up with that phrase, he was able to beat Bush on the fact that he would ask people “Do you feel better?” and actually they said “No.” “Even though the economy was getting better they didn’t feel better so it is a matter of people’s confidence,” Urquhart Stewart said. He explained that even in recession with an unemployment say at 10 percent that still means 90 percent of the population is working. “With low interest rates a lot of their mortgages are now lower, a lot of goods have gotten cheaper, and their utility bills have gotten cheaper so in many cases people are actually better off, but they don’t feel better off. You ask them and they’ll still shake their heads and say: ‘It’s a terrible recession,’” Urquhart Stewart said. In an attempt to stave of the crisis, several western economic institutions announced on February 27 they are joining to provide up to 24.5 billion Euro in aid to struggling banks in central and eastern Europe.

The World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) have pledged to provide the funding “to support the banking sectors in the region and to fund lending to businesses hit by the global economic crisis.” This aid is to complement national rescue plans and is intended to support lending to the real economy through private banking groups, in particular to small and mediumsized enterprises. Meanwhile, EU leaders were expected to defend member states’ interests in Brussels on March 1, attending the extraordinary EU Summit meeting, which was due to focus on the global economic crisis and its repercussions for EU countries. Besides the usual political warm words, the politicians need to assure that they are not going to be putting up protectionist barriers, they are going to be much more open and they are going to respond to US President Barack Obama’s initiative by being as creative as possible given the restrictions within Europe, Urquhart Stewart said, adding that EU Member States and their leaders have the habit of turning inward in times of crises.

“We need leaders to be statesmen and not local parish leaders,” the investment analyst told New Europe. Although unfortunately the EU appears to be dominated by the larger states, it should try to have unanimity regarding some standards of behaviour with regard to trying to reinvest in the future in times of weakness and to keep openness in terms of protection, he said. Regarding the banking system, Europe needs to focus on the issue of getting the banking system working again. “Not just bailing out all banks because some banks don’t deserve to succeed, but to rationalise the banking system, and to get the banking system working properly and that requires the governmental involvement in what’s going on and if I were the European leaders I’d be trying to do that on a pan-European basis and the more division they show on this then that would underline the lack of confidence there is in the economy and delay the chances for recovery,” Urquhart Stewart said.