House Chairperson, the ACDP shares the concerns about the continuing risks posed by the banking and sovereign debt crisis in the European Union and the extent to which that will impact on economic growth in South Africa. Many of our problems in South Africa are related to inequality, unemployment and a lack of economic growth. So, we do see the impact that this has.
The Reserve Bank, for example, in its Monetary Policy Committee meeting on 19 July 2012, warned that the outlook for the global economy has worsened, with mounting evidence of a broad-based global slowdown. It went on to say that the lack of meaningful progress towards a resolution of the Eurozone crisis continues to be a source of global instability and risk, despite initiatives to stabilise the banking sector.
Lower exports of South African merchandise to the Eurozone have and continue to have a direct effect on the country, with the Industrial Development Corporation estimating that if domestic growth contracts by R5,9 billion, 118 700 jobs will be lost. That is on the assumption that exports sales to the Euro area will be 5% lower than in 2011. That is clearly a matter of grave concern.
Tomorrow, interestingly enough, Germany's constitutional court will rule on the legality of the Eurozone's permanent financial rescue fund. It is expected to follow and allow the European Stability Mechanism, but with very strict fiscal discipline and tough conditions for new bailouts.
The fact remains that the Eurozone financial meltdown has a significant impact, and we will probably only know the exact impact next month, with the Medium-Term Budget Policy Statement. However, to conclude, perhaps the most insightful comment came from the Reuters news agency, which said:
As Europe considers a leap towards close integration to try to save the Euro single currency, it resembles the biblical Tower of Babel - unable to complete an ambitious project because the residents don't speak the same political and economic language.
It is not insignificant that the European parliament in Strasbourg is designed on the very Tower of Babel. It makes you think, doesn't it?