I was in Germany for a progress meeting of a research project last week. There was talk in the coffee breaks about the financial crisis in Cyprus. There seemed to be recognition amongst the Germans present that Germany has to assist the Cypriots and other EU member states in financial difficulty. One reason cited was the Cypriots and other EU nations are consumers of the products of German manufacturing industry including cars, washing machines and pharmaceuticals, and Germany needs customers for its manufactured goods. Of course, Germany is rich, at least in part, due to its engineering and manufacturing prowess.
In a similar way, during the 19th and early 20th centuries, Britain grew rich from its manufacturing industries. Some of Britain’s current economic woes derive from its neglect of these wealth-generating industries. A recent report [http://www.timeshighereducation.co.uk/news/graduates-in-stem-need-to-rise-by-half/2002594.article] suggests that the UK needs to train an extra 40,000 graduates in science and engineering every year just to maintain the status quo in this sector of the economy which is a 50% increase over current levels. I suspect that the UK is typical of many European countries.
Is it time that so-called ‘bail-out’ and ‘bail-in’ packages for countries included strategies for stimulating and supporting wealth creation industries rather than just rescuing those that have gambled with other people’s wealth?