All international efforts have failed to achieve the levels of economic recovery desired by the stimulus programs and the financial ‘first aid' packages. The latter's results did not engender any confidence, despite the optimism regarding the achievement of reassuring growth rates, and the establishment of the basis of economic resurgence, following the twenty-first century's defining economic crisis. It is as though all the financial remedies, despite the fact that they involved various levels of government intervention– proportionally with each major economy, be it developed or emerging –, did not converge to achieve the desired economic equilibrium: as soon as the situation stabilized in a given country, it collapsed in other countries, threatening global confidence in the effectiveness of economic policies, and attributing this to political weakness. Despite the sacrifices and efforts made by countries such as the United States, Germany, France, Japan and even Italy and Greece, the confidence that citizens place in the ruling class and governments waned to very low levels that are insufficient to reassure those behind economic stimulus programs, or to ‘buoy' the budgets of families and individuals. It is not enough that the relevant international organizations are predicting an increase of global growth to about 5 percent by the end of the year, bolstered by growth rates in Asia, led by China (10 percent) and India (7 percent) or other Asian nations. Instead, one must take into account the fact that these ‘auxiliary' growth rates cannot create jobs in the United States or the European Union, or restore momentum to industrial production and consumer markets. The basic problem does not lie in elevated rates of global growth then, but in the balance among the growth rates of each country around the world. Such a balance would be paralleled in the parameters of economic recovery, and would lead to less financial disruptions, something that has become a major concern for all countries. As a result, many countries will be passing financial reforms before the end of this year, in order to salvage things and transform the international financial institutions into modest bastions that are subject to the control of public administration, whenever they have thoughts of risky ventures. The International Monetary Fund's World Economic Outlook Update (July) emphasized such realities of the global economy during the second quarter, and mentioned that “recent turbulence in financial markets—reflecting a drop in confidence about fiscal sustainability, policy responses, and future growth prospects—has cast a cloud over the outlook. Crucially, fiscal sustainability issues in advanced economies came to the fore during May, fuelled by initial concerns over fiscal positions and competitiveness in Greece and other vulnerable euro area economies. Concern over sovereign risk spilled over to banking sectors in Europe. Funding pressure reemerged and spread through interbank markets, fed also by uncertainty about policy responses.” Generally speaking, the decline of citizens' confidence leads to ‘thrift' in spending as a dual result of economic reality: shrinking job opportunities on the one hand and caution on the other. This leads to rigid, if not reduced, spending levels, as can be inferred from the specific indicators in this regard that are yet to stabilize. The decline in domestic demand leads to weaker external demand, and to stalled industrial production, according to industry-specific indicators in the United States and several European countries. This goes hand in hand with rising inventory levels and declining trade, and also ‘compulsive' risk to stock foreign goods before the onset of regular seasons. In a scenario put forward by the IMF, “the magnitude of shocks to financial conditions and domestic demand in the euro area are as large as those experienced in 2008. The model simulation also incorporates significant contagion to financial markets, particularly in the United States, where reductions in equity prices dampen private consumption.” It is only natural that the traditional economy is lacking in investments, which are being restricted by the banking situation in America, Europe and even in Asian countries. This is because the remaining financial reforms desired by several G20 member states revolve around the freedom of banking and financial institutions' operations, especially in terms of the latter's volume, the extent of risk and hazards therein, and the subsequent need to subject these operations to the control of the monetary authorities (i.e. central banks). Thus, the United States and Europe have taken many steps to reform financial systems, institutions and markets, while the Finance Committee appointed by the G20 in Basel (Switzerland) submitted a draft proposal for banking reform, stipulating that the capital of banks must be increased. Faced with these measures, the benefits of financial banks shrank and credit operations contracted, and near-zero interest rates have become no longer attractive for profit-seekers. As a result, financial institutions shifted to speculation and more feasible finance operations, including the more lucrative operations in oil, precious metals and other markets. This created a vacuum in the credit market and in the financing of production. The ensuing result is austerity in production institutions, and contraction in the labor market. In the traditional free market economy, everything is linked together. If damage takes place to one of the links, the second gets damaged and so forth. This is the case with the economic reality in major countries that are failing to agree over the measures that can rescue the economy, all amid political confusion fueled by domestic disputes over political gains which do not save the economy. What saves the economy instead is confidence, then consumption, production and employment.
