The compromise between the European Parliament and Council on financial supervision has, barring a few rare exceptions, been warmly welcomed. In this column, we have endeavoured to underline the significance of European financial oversight as it is essential for the way our economy works and for social progress, and also given that, until now, there has been no such supervision, giving totally free rein to abuse of the system. There are many shortcomings in the compromise and Wednesday's parliamentary debate showed that not only the EP but also the European Commission and Council are aware of this. The president of the Ecofin Council has stressed that the agreement reached is but a prelude leading to lengthy debates to come on legislative texts for implementation. Commissioner Michel Barnier has defined it as a “very first step” (see yesterday's bulletin). Much remains to be accomplished and, on the parliamentary side, Sylvie Goulard, who is coordinator for the Liberal Group, has spoken of the binding powers that the new European authorities should be able to wield when it comes to rating agencies, derivatives and cross-border banking groups.
Two conditions for filling the gaps. Sylvie Goulard was one of the EP negotiators who managed to drag a sufficient number of concessions out of the Council to make the compromise acceptable. At the same time, however, she is aware of the shortcomings and the dangers. Member states wanted, in particular, to keep their ability to independently declare the existence of an emergency situation allowing intervention in respect of transnational groups, which implies the risk of bargaining between capitals. European supervisors, however, may: a) define common rules and ensure that national authorities interpret them in the same way (the European financial services market had been liberalised but “everyone did what they wanted”); and b) impose their own arbitration when two national supervisors do not agree. Taking all in all, “if one compares with what went before, then the EU has taken a big step forward”.
Does Sylvie Goulard believe that, in negotiations to open on the procedures for application, shortcomings may be met? I put the question to her, receiving her answer that it was possible but on two conditions - that the Council has no hesitation in using the faculty of taking qualified majority decisions; and that eurozone countries are willing to adopt certain measures among themselves when such measures are deemed timely or necessary. This would not be discrimination, as the United Kingdom and Sweden already meet the conditions for being part of the eurozone. If they do not do so, that is because they have chosen not to.
Recognised result. The list of parliamentary demands is a long one, from one political group to the next. Jean-Paul Gauzès, coordinator for the EPP Group, has underlined the need for regulation of alternative investments (such as hedge funds and private equity), and the Socialists have spoken along the same lines. The Greens Group has called for a “country-by-country reporting obligation for European companies”, and so on and so on. However, the importance of the result has been acknowledged by all main political groups. Emphasis has often been placed on the possibility for European oversight bodies to “suspend trading risky products in certain cases” - which is a major breakthrough. No political group of any weight has adopted out of hand the negative stance taken by a number of economists and commentators.
Areas lagging behind. The same optimism and the same generally positive tendency do not, however, exist on the subject of levying two taxes on financial activity: - the bank tax and the taxation of financial transactions. Addressing MEPs, the president of the Ecofin Council, Didier Reynders, spoke of a “still distant consensus” while expressing the hope that an agreement will be reached “in coming months”, and Commissioner Michel Barnier has confirmed there was no unanimity (see yesterday's bulletin). We all know that, in order to tax financial transactions, a worldwide agreement is essential so that European operators are not penalised. In the meantime, however, progress has been noted in other aspects negotiated at the global level. Thus, the German finance minister has announced that his country will not object to the November G20 summit approving the new rules on banks' capital (“Basel III”) fine-tuned by the Financial Stability Board. Opposition from the banks which, as usual, point to the danger of compromising their capacity to finance the economy, should not therefore compromise adoption of the new regulatory procedure, while possibly relaxing time limits.
How can one challenge progress towards a better regulated financial world, that is fully necessary if its function as a support for the real economy is to be regained? (F.R./transl.jl)