Beyond party politics. It is no longer a question of political allegiance, left against right or state intervention versus laissez-faire and so on. At a European level, criticism of the bankers is now just as pronounced within the EPP group as it is among the Socialists, the Liberals are in agreement (I'm not talking about the extremists whose common goal on both the far left and far right is not to improve European construction but rather to dismantle it). The political parties do not like this amalgamation because they have convictions regarding their own political identity and the differences separating the parties have not gone away. I am not talking about the general context but rather, the specific attitude regarding “bankers' bonuses”. I also want to distinguish between banking activities that are positive for economic growth and therefore, also for the workers when these activities finance investments, infrastructure and research as opposed to an abusive practices when they focus on speculation to the advantage of the big banks and specialised traders. Unfortunately, making a clear separation between the two types of activities is difficult (see this column in EUROPE 10016). Nonetheless, it is quite apparent that the widespread condemnation refers to speculative practices and this is why Gordon Brown and Nicolas Sarkozy are taking joint initiatives and the Socialists and Greens welcome (see this publication yesterday) the conclusions from the European Council.
It is also significant that among the many positions taken against abuses committed by the bankers, one of the strongest comes from the next European Commissioner for Energy, Günther Oettinger, from the German EPP. The banks appeared only interested in the dividends earned ignored all the risks. On one occasion Oettinger declared to the Congress of the European People's Party in Bonn that no organisation or body had been able to fulfil its role of ensuring supervision (EUROPE 10037). The very tough tone in the criticism made by the president of the European Central Bank of bankers' behaviour is even more significant because Mr Trichet in general adopts moderated vocabulary that tends to de-dramatise things.
Three measures for clearing up. It appears obvious, that the political authorities, in particular, were shocked, indeed offended by the way in which powerful banks rushed to refund the money they had previously demanded from the state in order for them to be able to recover a full freedom of action and hand out bonuses as they see fit, as if nothing at all it happened over the last two years. We have to ask ourselves the question of to what extent did they really need financial aid! They are sitting pretty: they obtain loans at zero interest rates, or all those, and want to be able to go back to the complicated speculative operations practised in 2007 and 2008 on the oil and food markets. The heads of bankers and traders scandalously got rich on the back of public funding and ordinary people. The joint statement by Nicolas Sarkozy and Gordon Brown announcing an exceptional tax on bonuses in the United Kingdom and France, published by the Wall Street Journal, explicitly points out that the bonuses in 2009 are partly paid for from state support to the banking system. The problem regarding the tax, as well as the other two measures being devised, require (given the global nature of the financial markets) comprehensive application. The three measures involve:
1. The super-tax on “bonuses”. The United Kingdom and France decided to apply this to bonuses this year. They then intend to extend them but two uncertainties remain: the result of the forthcoming British elections and the behaviour of other countries, particularly within the EU. Ms Merkel described this as an attractive idea but in order for it to be put it into practice, it requires certain clarification in the legal-constitutional arena as well as agreement from the Liberal party. If it is not applied comprehensively, this tax would damage the financial attractiveness of London and Paris. If the Conservatives win the next election, we will need to find out what Mr Cameron thinks about it.
2. The tax on financial transactions. The requirement of comprehensive application is even more indispensable because a Tobin tax, which is not imposed everywhere, would create the danger of shifting operations to financial markets where the tax is not applied. Negotiations, therefore, must be carried out at a global level.
3. Supervision of financial activities. The EU has made progress in this domain and a compromise has already been reached at the ECOFIN Council. Given that legislation is involved, the European Parliament is directly involved as well, on an equal basis with the Council. This column will return to the subject of prospects regarding this negotiation, which is fraught with difficulties, tomorrow.
(F.R.)