A technical measure that will influence the euro. While the Europe of the euro is seized by files which will influence its nature and even its existence, I think it would be useful to clarify a few points that, without being linked to immediate events, will directly influence the way the single currency works and is managed.
Today I'm going to speak about the controversial issue of splitting banks into two categories, which causes fierce discussions, without any outlook of quick accomplishment at the European level, but with the possibility of national decisions in one or other countries of the euro. This column has already mentioned this subject, which is worth a deeper look as the government of a member state, Belgium, is discussing it publicly and it is the deputy prime minister, Mrs Onkelinx, who fiercely supports the project. In an interview published in Le Soir on 7 September, she criticised “the arrogance of the bankers” and asked not only for deposit banks and merchant banks to be separated but also for government bonds to be issued without going through banks, and for an upper limit to be put on bankers' salaries. Here are the most telling parts of her interview:
Arrogance: “We are back to the usual arrogance of the big bankers. I was already in government when some of them came to see us at the time of the 2008 crash. They were lambs! Some had tears in their eyes. Now it's arrogance again.”
Urgency: “There is an economic urgency to regulate the banking world. The protection of private savers is at stake and it's a condition for the return to growth. Trying to find credit for investments has become extremely difficult. We must be able to finance projects.”
Separation: “Savers can't pay for the risks taken in speculative operations. We must work for the separation between merchant banks and deposit banks.”
At the European level?: “I have heard some people in support of having to do this at European level, so there will be nothing at all… The National Bank will submit a report to us in December. I say: 'Let's move forward.'”
Already in 2013: “The Belgian government agreement provides for immediate action. From 2013 of course.”
Measures to take: “We ask the bankers for humility. They are the ones who have landed us in this situation. The government agreement provides for putting a stop to the arrogance in the salaries in banks aided by the State. We need to cap their salaries, bonuses, golden parachutes… And bring it about that government bond purchases can be made by computer, without going through banks.”
To conclude, Mrs Onkelinx asked people to take no account of the reactions which claim that bank separation is not a bad idea but is not simple, that the European and international context… and so on and so forth: “These are speeches which are seriously beginning to get on my nerves! Let's move forward. A government agreement exists and I ask for loyalty.”
Against the objections. The Belgian deputy prime minister's interview was preceded by a position from Paul De Grauwe at the London School of Economics - a position in favour of splitting the banks. He tore down the current situation in which banks take risks with savers' money; if everything goes well the profits are for the bankers, but in case of loss, the State, which guarantees the deposits, has to carry the can. Mr De Grauwe considers that the objections are just a disinformation campaign from the banking world, to which he gave the following replies:
Too complex an operation? “We had separation for decades. It will not always be easy but if the resolve exists we can do it.”
Can a country do it in an isolated way? “Some bankers will acknowledge that the idea is good, but they will say we must wait for the member states to agree - which means that we would never do it! A good example is Canada which maintained the separation and has thus avoided the banking crisis that has ravaged the USA.”
Loss of competitiveness? “There is no reason for this. The success of a deposit bank is founded on confidence. On average it makes less profit than a merchant bank, but its profit is more stable.”
A brake on economic growth? “Ridiculous. We had the strongest growth when we had bank separation. Since the two types of bank merged, growth has not stopped decreasing, with banks getting more and more involved in speculative activity.”
Mr De Grauwe acknowledges that the Belgian government's task will be arduous because the banking lobby will mobilise considerable resources: “It needs courage and I wish it success”.
(FR/transl.fl)