Lessons from the Cypriot events. With the Cypriot affair now more or less sorted out, other more important aspects of Community activity are resuming priority - with the fine-tuning of the 2014-2020 financial framework that will determine the future of European construction being at top of the list.
The Cypriot events have brought their share of lessons. The events have enabled several principles to be clarified and confirmed - in particular: (1) the banks are responsible for their behaviour and they must accept the consequences of it; (2) the national authorities that allowed their country to be transformed into a sort of tax haven must redress the situation; (3) modest deposits are guaranteed, but speculative depositors must share the losses. If Cyprus had not accepted the final compromise, the European Central Bank (ECB) would have suspended its payments and Cyprus would have had to leave the euro and return to its national currency. Turkey had already proposed to Cyprus that it enter the Turkish monetary zone…
Let me just recall that the final negotiation in Brussels was led by the president of the European Council, Herman Van Rompuy, and that those speaking to the Cypriot prime minister were Mario Draghi (ECB) and Christine Lagarde (IMF) - with the participation of José Manuel Barroso (European Commission). The finance ministers (Eurogoup) then endorsed the result.
The criticism going hand in hand with this - criticism that is sometimes bitterly hostile towards the attitude of the eurozone and Germany in particular - seems to me to be unjustified. The eurozone's support to Cyprus nevertheless amounts to nearly two-thirds of the deficit to cover and it is the maximum that Cyprus would capable of paying back - which is indispensable for being part of this eurozone. In this context, the relationship between the Greek situation and that of Cyprus is not clear. Everything points to close links existing between the two countries' banks, but the repercussions of these links remain - as far as I can see - obscure.
Crucial bank disciplines. With the Cypriot case settled, the banks dossier can again be viewed from its overall perspective. EUROPE regularly reports on the new disciplines that the EU is progressively defining in this area, and at the end of last week (see EUROPE 10812) EUROPE gave news of the final agreement between the Parliament and the Council on the capping of bankers' bonuses - it remains to be seen whether the United Kingdom will vote against this measure. A large number of the new banking rules will enter into force at the beginning of next year - and consequently a German member of parliament felt able to state: “Europe will be a bit more fair in 2014”. The bonuses aspect is the most visible one, but it is only one of the rules which - according to Michel Barnier's clever phrase - “will strengthen bankers' capacity to manage the risks linked to their activity correctly”.
Of course, banking activity is irreplaceable - that's exactly the reason why it must be carefully regulated and controlled. An MEP has described the situation as a “banking monster”. I would add: “But we're in the process of changing it”.
On several sides, it is emphasised that the events in Cyprus should accelerate true banking union in the EU. This banking union is being worked on, as we well know, but the steps are slow and the reluctance of certain types of bank is very keenly expressed, with support in a few capital cities - not only in London where, moreover, the bonuses handed out by Barclays (over a £1 million per head to 428 bankers last year) have caused quite a backlash. For this aspect of bonuses, negotiators in the Parliament and Council defined an agreement a few weeks ago. The Parliament will soon vote in plenary and a few adjustments to the text could be made, but a majority in favour already seems in the bag.
Even public opinion is reacting. The case of bonuses is only one aspect of banking discipline. Yet the time seems right to act because even public opinion is shaken up. A survey published this Wednesday uses very strong terms, such as: Bankers in search of lost honour or Bankers are no longer doing their job. This column will come back to this.
My general conclusion is that the end of the Cypriot affair must re-start the Parliament-Council negotiations on the new financial framework of the EU which - beyond the figures - will have to redefine the common policies (agricultural policy, on which discussions are very heated; and the cohesion policy, which is essential for several member states). We are entering a new phase. Behind the scepticism on the future of Europe is often hidden the defence of interests that are not always noble. (FR/transl.fl)