Staggering losses suffered by a big French bank and the meeting between heads of state and government from the four biggest EU countries to talk about the financial and monetary crisis grabbed the public's attention last week. These two events did in fact confirm what was already known: a) abuse committed by part of the financial world and the inadmissible lack of clarity of the financial markets; b) an identity of generic views in the EU on the need to introduce more transparency and surveillance, but with differing opinions on how to take action.
Positive aspects of speculative failures. I continue to believe that a radical overhaul of the way in which the financial markets work is needed, if speculation is to be reduced and if there is to be more of an equal distribution of the fruits of growth. The 2007 crisis will one day be considered as inevitable and even positive. No regret will be justified for the failure of a few speculative operations or for the losses of those who were responsible for them. Using virtual money to make astronomical profits is a game that has too often succeeded; for once it didn't and we're not going to feel sorry for the speculators. I think pretty much the same about the shareholders who considered dividends of 20%-30% a year normal or even obligatory, to the detriment of other economic players. It is healthy to get back to fairer dividends that allow the profits to be better shared out, given that the banking institutions have to meet their commitments with regard to savers (and with the support already observed from the financial authorities). Sensationalist headlines in the press about the billions and billions that “went up in smoke” on the Stock Exchange should be taken with a pinch of salt: a lot of the money didn't actually exist.
If this earthquake leads to more emphasis being put on the real economy (what we create, invent, the goods we produce) and if the world of pure financial speculation goes down among the losses and scandals, so much the better for everyone. The banks are obviously indispensable for savings and financing projects and by sometimes taking risks, their profits can be justified. Artificial operations, however, on the futures markets or derivatives, which more often than not consist of using non-existent capital for the developments desired, only benefit the speculators. They've often earned unimaginable sums and now have to accept the losses. A botched speculative venture warrants a sigh of relief, especially when there are suspicions of insider dealings accompanying them (which are quite often inferred in the press).
Leaders' banal comments. What should be said about the second theme? Last week's meeting between heads of state and government from the four EU “biggies” caused quite a lot of noise in the media, following the internal polemic stirred up by national sensitivities in a few member states: Italy, first of all (a country that had been initially excluded and then hooked in), followed by Spain. Certain newspapers and declarations would have had us believe that a question of national honour was at stake. It is curious that these meetings are so vigorously condemned by those not participating in them, and as soon as they are invited to attend they are transformed into a subject of pride. Ignoring Community procedures is only to be condemned if one has not been invited. At the London meeting, European honour was saved by inviting the Commission and explaining that the aim was to invite G7 and G8 countries: it proved timely that these countries coordinate what is said in these bodies. The London meeting in fact confirmed what was already known. It also confirmed divergences of approach. The possibility of a recession in Europe was ruled out - there would simply be a “slow down”. Given the lack of agreement on what measures to take, the Four went no further than expressing a number of good intentions: transparency and controls ought to be reinforced, but the responsibility and capacity to intervene would mainly remain within a national remit; the hypothesis of having a European body responsible appealed to some but not to all. The banks are keen on making a “prompt and complete disclosure” of their losses. The credit agencies have to be swift and clear, in the sense of transparency. Nicolas Sarkozy added, nonetheless, “we are arranging a meeting of the credit agencies. If they don't do anything, we will regulate”. Angela Merkel appeared to agree, the others didn't (EUROPE 9591).
Readers may observe that there is almost nothing new in this commentary. I'd pretty much agree. An interview with Jean-Claude Juncker is needed before this stage of banalities can be overcome. This column will report on this tomorrow.
(F.R.)