In the financial arena, the most recent “old-style” Council, chaired by the head of a government from a member state, simply confirmed what had been agreed and what the orientations would be for the future. This is no mean feat because the EU's position is subsequently reaffirmed and made more precise at an internal level and, more importantly, at an international level. It should also be taken into account that the formal “conclusions” were accompanied by bilateral initiatives (especially from France and the United Kingdom) and by positions taken within other groups organised at the Council (particularly by the president of the European Central Bank).
Brief outline. Let's have a brief look at what the summit confirmed.
Introduction of general recovery policies. Policies for supporting the economy are maintained and expected to continue until the recovery is fully guaranteed.
Budget deficits. Tackling budget deficits should begin no later than 2011 and annual efforts at bringing down the budget deficit should be above 0.5% of GDP. It's will be necessary to end aid programmes to the financial sector, in accordance with an approach coordinated between member states.
Financial monitoring. The summit welcomed the ECOFIN Council's approval for a fundamentally new structure and called for negotiations with the European Parliament to begin as soon as possible, so that the new system can be operational in 2010. This is an ambitious goal and this column will be returning to the subject of the prospects for negotiations with the EP.
Salaries. The summit called for clear and binding rules and is awaiting a definitive agreement as soon as possible with the European Parliament. It is inviting the financial sector to immediately implement healthy practices and is encouraging the European Commission to closely follow this implementation.
Taxation. Within the IMF's range of possible options, is the explicit mention of an international tax on financial transactions.
The last point confirms that the “Tobin tax” (a name that continues to be used, although IMF experts indicate that the possible project will not be very like the former one) has been retained amongst the possibilities the IMF is considering. This is not a formal EU demand because several aspects must be made more precise, such as the destination for the revenue created; but support from European leaders has become very broad-based. The real obstacle can be located in the need, reaffirmed by the German Chancellor, Merkel, for application across-the-board worldwide, without which, financial operations would relocate to wherever the tax was not applied. Jean-Claude Juncker, the president of Eurogroup said that this was a wise initiative for putting into practice at an international level and Mr Barroso reaffirmed the need for novel ways of financing.
Political determination to take robust action. During a joint press conference at the end of the summit, which constitutes a Franco-British initiative and has a twofold symbolic meaning, Nicolas Sarkozy and Gordon Brown explicitly affirmed their determination to take action: a) this highlights the fact that former misunderstandings have been overcome with regard to the appointment by the president of the European Commission of Michel Barnier, from France, as European Commissioner for financial services (in addition to other responsibilities); b) it confirms and consolidate the bilateral decision to levy a specific tax on “bonuses” paid by the banks to traders specialising in financial speculation. This decision, as we are aware, had previously been announced in a text published in the Wall Street Journal and jointly signed by Gordon Brown and Nicolas Sarkozy, affirming that this specific tax on bonuses is even more a priority given that the increase in bonus values again has been made possible by aid from the public sector to the bank . Broad-based application of such a tax was explicitly called for in this bilateral draft. A formal EU position in this connection does not yet appear legally possible. In Germany, for example, preliminary examination from a constitutional point of view is necessary. The path, however, towards this goal appears to being outlined.
Overall, despite legal and other obstacles, recent developments in the behaviour of the banking world have reinvigorated and strengthened the EU's determination to impose rules and take robust action in the areas of monitoring and taxation. This determination goes beyond geographical and political borders. This column will be returning to the subject tomorrow.
(F.R.)