The EU and the GCC: Challenges and Prospects under the Swedish EU Presidency

Abstract

IBF is a novel financing method with a particular value and operational proposition which has existed in its modern form in the GCC region since the mid-1970s. Since the 1990s, it has become an important partner in the global financial system, and currently, IBF has proved that it is a sustainable reality, evidenced by its resilience and growth even during a period of financial crisis. Thus, it provides alternative opportunities for all countries regardless of its religious nature, as in its modern version it represents ‘commercial banking’ with a specific legal method, namely Shari’ah compliance. IBF’s contribution to the EU economies is unquestionable, as Davies argues above, and further developments in IBF in the EU are expected in the coming years. The lack of a common financial system in the EU will complicate the task of expansion of IBF, but the experiences and social capital of the countries that have already adopted the system will help other countries to locate ways in which they can make amendments to their legal and regulative environment. For example, the French financial authorities benefited from the British experience and the Italian financial environment followed the French and the British example. This paper suggests that in addition to its contribution to the economies of the EU countries, IBF can play an important role in reconciling the political differences between the GCC and the EU countries, and hence can act as a bridge to civilizational dialogue. In the past, it was trade that managed to bring the worlds together for a peaceful coexistence; IBF can play that role in contemporary times. The same spirit and wisdom of the past centuries can shed light on the new encounters between the two worlds through financing activities. The hope is to move away from ‘dependence’ on the European norms in financing to ‘interdependence’ in which parties are equal in terms of institutions, operations, as well as knowledge. In this context, the attitudes of the EU countries will play a key role in determining the success or failure of the new system. While many countries such as the UK, Switzerland, France and Luxembourg, have shown positive and facilitating trends so far, only time will tell where such a dialogue will lead.

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