Things Europe can do by itself. The EU has made clear progress in economic governance and new financial discipline, but although it is able to act alone in some areas, it needs its global partners for other indicatives. The European Council last week indicated a timeline for things Europe can do alone: early 2011 to get new financial surveillance mechanisms up and running; before the summer break (immediately, in other words) for the new hedge fund rules; and “without delay” for examining the Commission's ideas on controlling credit rating agencies. In addition, the Commission's draft rules on short-selling are eagerly awaited. These are important points and it is significant that the politicians want to make fast decisions; but publishing a timeline is not the same thing as actually agreeing, and disagreements exist over issues like short-selling and some commentators say the EU programme is too little, too late. But what the timeline does indicate is a political will to take action. Decision time is approaching for things like market surveillance systems but other issues remain open, like penalties for breaking the Stability Pact rules that the European summit left to one side while awaiting the results of Van Rompuy's taskforce's work. These are all decisions that cover Europe alone.
Global cooperation. Other aspects cannot be achieved without international coordination and the European summit simply set out the line the EU will be taking at the G20 summit in Toronto at the end of the week. It said the EU “should lead efforts to set a global approach for introducing systems for levies and taxes on financial institutions” (only the Czech Republic refused to commit to this. “The introduction of a global financial transaction tax should be explored and developed further in that context.” The vague wording of the last sentence reflects reluctance within the EU itself, whose heads of state have in committed themselves to the idea of a tax but do not necessarily believe it will happen. Europe is, however, unanimous in calling for a coordinated phasing out of the special economic recovery measures at the rate appropriate for each economy, and calls for weighting at the IMF to be revised.
Agreement on all these issues will not be plain-sailing at Toronto because different countries have different priorities. Barack Obama has called for two things: China must revalue its currency and Europe must kickstart its economy. As far as the president of the United States is concerned, economic growth is the priority and if all countries start reining in at the same time, that will snuff out any flickers of growth and increase unemployment. Budget discipline must therefore be flexible. The United States wants to be able to increase its exports to cut its trade deficit.
China has responded by announcing a relaxing of its exchange rate policy and therefore the possibility of revaluing its currency, but has given no indications of when and to what extent. Its promises are vague and positive reactions seem a little over-optimistic. We shall see. Germany is being asked to boost imports by stimulating domestic consumption, but that doesn't seem to be the direction Berlin is going in. If the Toronto summit is going to agree on anything, then every country will have to be flexible.
Different priorities. The euro/dollar exchange rate has not been broached by either Obama or the European summit, but the United States is critical of the slump in the euro's value (which makes it easier for the eurozone to see its goods around the world and makes it more difficult for the US to export to the EU), but people in Europe argue that the euro was overvalued anyway. Despite these disagreements, Europe and the United States have pretty similar views on the need to keep a close eye on the money markets and the banks, because the US and the EU have suffered the most from the abusive speculation and absence of rules. Other G20 countries have been less affected and emerging economies, which didn't suffer so much from the crisis, want to consolidate and expand their banks and are certainly not willing to levy taxes or levies on them. It is said that Brazil, India and even Japan will not go along with bank taxes.
These disagreements should not be overplayed because it is only to be expected that in the run-up to international negotiations, every country will try and beef up its powers of negotiation, but neither should we expect any miracles in Toronto. The EU has to remain close to the European summit's conclusions document. The Franco-German approach (see below) can be justified by the fact that member states are attending the Toronto summit as countries rather than as EU representatives, and Merkel and Sarkozy have brought up issues not discussed by the European summit. It will be some time yet before the EU finally speaks with one voice… (F.R./transl.fl)