The global economic and financial crisis has accelerated international power shifts with China, India and Brazil emerging as the new economic powers.

But can international institutions such as the European Union and the United Nations governance these changes?

This question and other perspectives for 2010 and beyond were addressed by the British Ambassador, Alex Ellis, in Lisbon on Monday at a lunchtime event organized by the British-Portuguese Chamber of Commerce.

China, India and Brazil were the “new kids on the block” with regards to capital, markets and investment opportunities for the rest of the world, including Portugal and the United Kingdom.

Both the banking and financial crisis and credit crunch in 2007 and 2008 and the Copenhagen Climate Summit had clearly shown that the Western Powers – the EU countries and United States – could not tackle global issues alone in this new world reality.

Any measures on climate change, for example, taken by either the USA or EU were simply “meaningless” without the cooperation of China which is both the biggest emitter of green house gases and the largest trade exporter.

The financial crisis, managing climate change consensus and the emergence of the BRIC countries has thrown up uncertainties for both Portugal and Britain.

There were fewer “fixed points” than 10 years ago. Portugal was currently growing in terms of GDP at a forecast rate of 0.6 per cent for 2010 while Britain was forecast to enjoy a faster growth of 0.9 per cent; Portugal was leaving the recession later but Britain might grow faster when it emerged from the recession.

The Ambassador pointed out that the outlook for both countries for 2010 was similar in some respects. Both countries had been affected by the recession, arguably the worst since the 1930s, both countries were running high budget deficits – Portugal at 8 per cent and Britain at over 12 per cent, her highest since World War II.

Both countries were suffering high public debt; Portugal’s running at a staggering 80 per cent and Britain’s growing from a base of 40 per cent of GDP.

Unemployment was high in both nations with Portugal’s nearing 10 per cent and Britain’s at eight per cent.

“Governments are looking at their budgets to address these issues, either through public works programmes, public administration cuts or a mixture of the two. The question was how far does a country go without increasing the cost of servicing its sovereign debt or stifling growth?

How could deficits be balanced while keeping unemployment down and market growth up?

Public works job creation programmes could keep unemployment down but would add to both governments’ debt and deficits.

A drive on exports was on both countries’ policy agenda with Portugal’s PS government pledged to up exports from 31 per cent of GDP with the need to increase trade links with the oil producing countries, the emerging economies and markets such as Angola and Brazil.

In the realm of politics there were also similarities. Portugal had just had elections but there was a pre-election atmosphere because of a lack of political settlement, while in Britain elections were to be held in the spring.

In Portugal a centre-left governing party with a minority in parliament was striking deals with far left parties to press through its agenda with a series of moves to settle outstanding issues with the left and unions.

“Politics feels similar in both Portugal and Britain, some commentators feel that the government won’t last a four year term in Portugal but no party wants to provoke early elections.

While both countries had shared colonial pasts, were maritime, outward-looking and members of the EU and NATO as well as having close relations with the USA there were clear differences between them in terms of identity and culture and the threat of terrorism which was a daily concern in Britain.

That was why Britain was deploying 9000 troops in Afghanistan since sources of terrorism were concentrated in South East Afghanistan and North West Pakistan.

Portugal does not share the same kind of threat from terrorism although the Basque separatist group ETA has been found to be operating cells within Portugal proving that no country was immune to terrorist operational bases.

Portugal was more homogenous and united while Britain was dealing with the possibility of a referendum on an independent Scotland.

Immigration is an issue for Britain whereas Portugal does not have such big issues around immigration and identity.

And as both Portugal and Britain appeared to be moving towards greater cohesion with the EU as a result of the Lisbon Treaty the question was how far the emerging BRIC powers were interested in Europe or behaving like Europe in the new world order?

Would China and the United States accept verification over climate change measures and other issues and how far would global cooperation ultimately go in an increasingly globalized world?

One thing is certain for the future: the world cannot fight climate change, financial crises, infectious pandemics and international terrorism without cooperation between the new emerging powers such as China, India and Brazil and the traditional Western economic powers, the United States and the EU.

Text and photos: Chris Graeme