If Europe wants to know how Greece's crisis ends, Asia provides some vital clues, ones being actively ignored at the moment.
Yes, it's a less-than-perfect comparison. Fourteen-plus years after Thailand's currency devaluation touched off a region-wide meltdown, Asia and Europe are still a world apart. Asia wasn't shackled with a single currency or one central bank. Yet it's the last place to experience anything similar to what's afoot in the euro zone. Asia's 1997-1998 implosion toppled governments, fueled riots, devastated living standards and brutalized markets.
Europe's own pain is just beginning. What can it learn from Asia's experience? Four things, actually.
One, politicians can't stop an unavoidable default. Europe's efforts to save Greece are as commendable as they are futile. Athens will default no matter how many bailouts are tossed its way. In 1997, remember, Thailand said it had plenty of currency reserves left -- it didn't. Indonesia swore it wouldn't get dragged into the mess -- until it was. South Korea assured the world it would avoid an International Monetary Fund aid package -- until it couldn't. It would be better for Greece to default tomorrow rather than two years from now. Let's get it over with.
Two, drop the denial. The quicker Thailand, Indonesia and Korea owned the magnitude of their problems, the faster recovery came. Korea acted quickly to close insolvent banks, let weak companies fail, clamp down on tax cheats and admit the size of its debts. Honesty, transparency and boldness hasten redemption. That heavy lifting helps explain why the MSCI Asia Pacific Index is up more than 12 percent so far this year even amid Europe's woes.
Three, growth matters. The IMF demanded that Asia hike interest rates and slash spending to receive aid. Those steps exacerbated and prolonged the pain. Amid all the worries about bubbles in the world, what about the bubble in austerity? It means Europe's woes will drag on and on -- and on.
Four, get on with reforms. The risk is that Europe focuses too much on debt-to-gross-domestic-product ratios and not enough on making economies more nimble, competitive and conducive to entrepreneurs creating jobs. What Asia did well is raising its game and generating new dynamism. Since euro nations can't devalue currencies to revive growth, change is the only way. Asia can show them how.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)
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