Is there a silver lining in the euro zone crisis – for Africa?
The measures taken by the European Council to solve the fiscal crisis in Europe may or may not work, and it certainly will be some time before their merit can be fully assessed. In the meantime, however, the crisis might provide a window of economic opportunity for other regions, according to Brookings Institution scholar Vera Songwe.
She posits that Africa’s Communauté Financière Africaine (CFA) franc zone could reap the benefits of a depreciated euro.
“Since the CFA franc is pegged to the euro, its depreciation should lead to increased competitiveness of CFA zone exports to the U.S., China and other regions. . . . . . In fact, if CFA countries fail to reform their labor markets as well as the overall business and trade environment, they will miss an opportunity to increase their export competitiveness,” asserts Songwe in a recent paper.
As positive as she is about the potential gains, she does not downplay the critical need for the nations of the CFA to improve the region’s infrastructure, governance, and to combat corruption.