Silence at the institutions. To my knowledge, no Community institution has commented on the collapse of the European stock market project. In November, Charles McCreevy, speaking on behalf of the Commission, indicated that he had nothing against such a project (“Why not?”) and that it was “up to market players to decide on the question” (EUROPE 9312). The Council has never officially discussed the matter, although some finance ministers took a pretty clear position on the question. The economic and monetary affairs committee at the European Parliament posed some oral questions to Mr McCreevy with regard to what has happened but the plenary session did not discuss the matter. Nonetheless, Pervenche Berès, president of the above-mentioned committee, in a personal capacity, did take a position on the issue (see below).
At the time the merger between Euronext (which brings the stock markets of Paris, Amsterdam, Brussels and Lisbon together) and the Frankfurt and Milan stock exchanges was being discussed, several political figures gave their blessing to the development, including Jacques Chirac and Angela Merkel (even if the latter underlined that she had no influence in this area). Even the president of the European Central Bank (ECB) Jean-Claude Trichet said that, “the European option would be preferable to an external option”, but added that the ECB had no clout on the subject and therefore had no position (EUROPE 9219). What in fact happened was that the intra-European project failed, Euronext agreed to an alliance with the New York Stock Exchange (Nyse) and the political world kept schtum.
Authors of Euro-US cooperation outline its advantages. Those responsible for Euronext have always affirmed that their merger with the Frankfurt stock exchange was impractical and that the alliance with Nyse was much more preferable and in their opinion “more European”. These affirmations are based on technical and legal analyses illustrated in several declarations and interviews. Nyse officials also bent over backwards to make certain concessions (particularly with regard to re-balancing the governance of the future entity) and aim to provide guarantees that Euronext would not simply be gobbled up by the Americans and that the result would be a genuine partnership with reciprocal advantages. In practical terms, shareholders voted in favour of the operation with 98.2% giving it “the thumbs up”. Even an association representing employees voted in favour, after having obtained assurances that there would be no redundancies. Care was particularly paid to making sure that American standards and practices would not be imposed in Europe and that an appropriate legislative and regulatory environment would allow (through a council of “wise men”) for possible extra-territorial US rules to be opposed, even when a decision on the question is made by the US Senate. The Chairman of the Euronext board of directors, Jean-François Théodore, emphasised that the result of the alliance would not be a company managed in a unified and centralised way but would, “clearly be on the basis of a light holding. The computer system will be integrated to reduce costs; for the remainder, the subsidiarity principle applies”.
I am not in a position to evaluate the impact of the arguments that led to the creation of the first inter-continental stock market in the world, bringing together the stock exchanges of New York, Paris, Amsterdam, Brussels and Lisbon. Euronext shareholders undoubtedly considered them in high esteem: the merger will increase turnover and allow for very significant management economies to be made. Officials announce that the cost of stock market transactions will fall in the next few months from 15% to 20%, to the benefit of investors. This argument does hold some weight and proves the benefits of competition, not only for the stock exchanges but also with regard to other channels for financial transactions. Seven merchant banks, as we are aware, have announced that they will be launching their share exchange platform this year, thanks to the fact that the stock markets' monopoly has been ended by the European directive on liberalisation entering into force next November. These are all top-ranking banks: Deutsche Bank, Citigroup, Crédit Suisse, Morgan Stanley, Goldman Sachs, Merrill Lynch and UBS. Other banks are also still free to join.
Other advantages. Jean-François Théodore also introduced other elements to prove the advantages of the Euronext/Nyse operation, two of which deserve a mention:
a) the doors have not been closed to agreements with the Deutsche Börse in Frankfurt. On the contrary, according to Théodore, such agreements will become easy and allow for Frankfurt's “share markets” to be evaluated, which are currently restricted to the national market. The possibility of an approximation of shares is envisaged that would separate post market activities and derivative products and therefore get rid of the “danger of complicated legal questions threatening the very beautiful Clearstream and Eurex machines” involved in the post market and derivatives markets;
b) the operation will provide European shares and firms with a radically increased visibility in the press and on American television, through the creation, for example, of global indicators.
Nevertheless, it should be stressed that while Deutsche Börse announced that it was pulling out of Euronet negotiations, the German president of the group, Renato Francioni, explicitly put the failure of the intra-European agreement down to the unwillingness of the other side. He alluded to Euronext's “abundance of irrational scepticism”, which meant that the difficulties were really artificial. In his opinion, Euronext had already decided to merge with Nyse and preliminary discussions with Frankfurt served no other purpose than to say that the European channel had been explored. The fact that Deutsche Börse had already submitted its project to “create a consolidated European shares market”, should be highlighted. In Brussels this dossier has still not gone away.
Has political interest vanished? I think that I have given an objective account of Euronext's thesis. Beyond the technical financial aspects, which are, as I said, beyond me, and which everyone can interpret as they see fit, the question is really one of whether the political positions taken in favour of an integrated European stock market are still valid. Has the importance of such an accomplishment disappeared? Is the opinion that defines this domain as pertaining to the general interest where the public authorities should have their say, still valid? The situation appears to present a few analogies to that of the energy issue. At the outset, the autonomy of the oil companies in supply agreements and other arrangements was clear. Then, gradually, the political authorities got increasingly involved and today, particularly with regard to Vladimir Putin taking Russian energy policy questions into his hands, combined with the political decisions in other producer countries, political intervention is the order of the day and now appears inevitable and in practice, quite normal. Can we expect another development of this kind to affect the financial markets or has the matter been sorted out?
What they were saying yesterday. The goal of creating a European stock exchange was clearly indicated yesterday, although this would only be a Euro-zone stock exchange as the London stock market merging with those on the continent is not on the cards. Finance ministers from Germany, France, Italy and Spain spoke openly of their periodic meetings. Following a bilateral Italy-Germany meeting in Berlin, the German minister, Peer Steinbrück expressed a “clear preference” for a European development: “the European stock exchange is an idea that we can develop”. The Italian minister, Tommaso Padoa-Schioppa, was even more explicit: Italy and Germany consider it normal that after the creation of the single currency, they move towards a single stock exchange. He said that the independence of the stock exchanges (which are private entities) should certainly be respected, but added that the services they provided include a “public interest” element in them and that governments should take this into account, while respecting freedom of choice.
Dialogue between France and Germany went as far as Heads of state and government level, and in the final press conference at the end of the seventh Joint Ministerial Council, Jacques Chirac declared that with Angela Merkel, “we share the same approach and feeling, namely preference for a European solution”. On another occasion, he said that “for reasons of principle, we regret that this solution was not adopted”.
What remains of these positions? Should the collapse of the project for a European stock exchange be considered as a private matter or as a failure in European construction? Before the dénouement, Pervenche Bères, president of the European Parliament's economic and monetary affairs committee said in writing that the stock exchanges are not like other markets and that they “exercise a mission pertaining to the general interest”. In her opinion, the strength of Euro zone countries, faced with the USA, is mainly found in its cohesion, and the merger between Euronext and the Nyse would in fact be a “takeover of Euronext by Nyse”. She also pointed out that the Euro “would never be entirely due to the dynamism of the markets” and cited the former Bundesbank president, Karl Otto Pöhn's, position taken in favour of the European solution.
I still don't know the positions of the European institutions following this dénouement but I did notice that the London stock exchange had rejected buy-out offers from the Nyse. Is this just a question of the offer being too low or does London consider that the national character of the stock exchange (25% of which already belongs to the other US giant, Nasdaq) has a certain weight?
(FR)