The gradual introduction of economic governance in Europe (once taboo but now almost a cliché) is still centre stage and will be the focus of debate at Thursday's European summit. It should not blind us, however, to the fact that at the same time, new rules are gradually being introduced to change the way the financial world operates.
Another idea of Germany's that could be taken up by the EU. Germany is taking a very firm position here. The German government has virtually taken the lead in Europe and the world in general when it comes to giving the real economy precedence in practice over financial wheeling and dealing. This may smack of empty phrase-mongering because no end of politicians and official bodies have been voicing very strong criticisms of rabid speculation in the world of finance. I quoted three eloquent examples in my column in issue 10153, namely Valéry Giscard d'Estaing, Giulio Tremonti and Jean-Claude Trichet. The Germans are saying less but doing more. Faced with the problem of getting politicians in the eurozone to agree to ban naked short-selling, the German government decided to go it alone. Roundly criticised for acting unilaterally, the government went even further and extended the move. The German measure has now become a joint Franco-German approach at the highest level (see the joint letter/statement by Angela Merkel and Nicolas Sarkozy, details in issue 10156), encouraging the European Commission to speedily present all possible areas for action in the form of EU legislation. The Commission was already working on this, planning to unveil draft legislation in September - perhaps this will be brought forward?
Germany's measures were criticised not only because they only applied in Germany but also because it is claimed that some aspects of the German ban jeopardised market liquidity. This does not alter the political significance of Berlin's move - showing the way for how we can return to an economy based on the production of goods, technological progress and innovation. A return to the real economy should be backed. The fact that France and Germany have jointly taken action against abusive speculation is encouraging in itself, and it is now time for politicians to decide on suitable rules and stand firm in the face of reluctance, pressure and downright blackmail from the financial world.
A global issue. Regulating the financial market will not be genuinely effective unless EU measures are then followed by action at global level, failing which it would be so easy for financiers to bend the bans by operating from other parts of the world. This is the true nub of the issue, over and above any technicalities and legal matters, and the EU institutions, particularly the European Parliament (making good use of its new co-legislative powers on an equal footing with the Council of Ministers), are working on it in their preparations for the G20 summit.
Everyone will benefit. We should never forget that at the end of the day, everyone will benefit from putting the real economy first. Germany certainly benefits from recognition of the high standard of its products and is consolidating its position as a leading world exporter, but German industry outsources ever more manufacturing (of spare parts and even design) to companies in other member states. The Czech Republic exports more to Germany than it imports! The trend to shift manufacturing (even of high quality brands) to outside the EU, particularly China, may now be slowing down to the benefit of countries in Europe that are geographically closer and can guarantee better quality and proper respect of intellectual property. Most economists agree that as long as Germany encourages higher domestic consumption, its export capacity will be beneficial for the EU as a whole. It is here that the work on new rules to govern behaviour in the world's money markets meets up with the wider debate about economic governance in the eurozone. The two go hand-in-hand...
We must never forget the global nature of all this. The new financial rules will have to have a fundamental global dimension. Much progress has been made at EU level but there are some gloomy signals ahead of the upcoming G20 meeting. Putting the real economy first should be clearly stated, non-negotiable and borne in mind even when discussing technicalities.
(F.R./transl.fl)