I wonder whether the recent declarations of Angela Merkel on the management of the international financial markets got the attention it deserved. The banking and financial worlds no doubt noticed them (and pondered them at length), but I'm not aware of any reactions from political leaders or discussions at the European Parliament (or in the competent Parliamentary committee, even though it is chaired by a highly attentive person). What, in essence, did the German Chancellor say?
Taking account of the industrial and commercial weight. In an interview published last week in extenso in the German version of the Financial Times, Ms Merkel openly criticised the excessively Anglo-Saxon functioning of the financial markets; and the context clearly indicated that she was referring both to the United States and the United Kingdom, which are considered to be a single entity in practice. She believes that the role and place of the euro are insufficiently taken into account. The euro system, which is becoming increasingly solid, does not bring to bear the influence it deserves on the rules governing the financial markets. In particular, she called for the importance of her own country in trade and industry, and, by extension, the weight of the eurozone (of which, as we know, the United Kingdom is not a member) to have greater powers in laying down the new rules currently being discussed at international level. This influence she is calling for is not a purely legal influence, but a political influence, so much so that, according to the City, she reaffirmed herself as the principal European political leader. Without going into technical details, the Chancellor called for transparency of the financial markets, criticising their opacity compared to the industrial markets. In industry, the clients know the products which are offered to them, and can assess them; for financial products, this is not the case. The industrial power which exports more than any other in the world (her country) and the solidest currency (the euro) must count for more. Ms Merkel referred explicitly to the forthcoming G8 summit in Japan as the time for these realities to be taken into consideration.
An immediate plan, differences of opinion on other subjects. On one point, Ms Merkel made an explicit appeal: for the creation of a European ratings agency with similar levels of influence to the American equivalents, Moody and Standard and Poor, and the British Fitch. Discussions on the actual independence of the three bodies (which are sometimes judge and jury) and their possible responsibility in the sub prime mortgage crisis are well-documented. And it is unlikely to be a coincidence that European Commissioner Charlie McCreevy announced his position on this two days later. Previously, he had said that the ratings agencies should be self-governing, and that the Commission would intervene legislatively only in the absence of satisfactory self-regulation on the part of the agencies themselves. On 16 June, expressing his dissatisfaction with their plans, he announced that sensible and targeted rules were necessary for agencies operating in Europe, and that the Commission would propose these in the next few months (see our bulletin 9683). It has been announced that the Ecofin Council will be discussing the matter as early as next week, without waiting for the Commission's drafts.
Ms Merkel did not refer to another hot topic which will be on the agenda of the G8 summit, that of the role of financial speculation in the increase in oil prices. This was not necessary, because the International Monetary Fund (IMF) has already been called upon to draft a report on the subject, which will be ready in October. In the meantime, the European political leaders are carrying out increased numbers of assessments. Following on from the full frontal attack by the American justice minister (see this column in our bulletin 9676) and the criticism voiced by the Italian minister, Giulio Tremonti (see this column in our bulletin 9685), the president of the Eurogroup, Jean-Claude Juncker, estimated the effects of speculation at somewhere between 20% and 30% of barrel prices, and the French secretary of state for European affairs, Jean-Pierre Jouyet, at 20%. European Commissioner Andris Piebalgs is remaining cautious, going no further for the time being than to call for studies into the issue to be stepped up (see our bulletin 9689), which is not enough, according to members of the European Parliament. But the EU and OPEC have at least announced a joint impact study of the financial markets on prices and their volatility (see our bulletin 9689).
The G8 summit will also tackle other subjects on which the EU does not yet have unified positions, such as the investment regime to be applied to the stakes of sovereign funds of third countries in European companies, and possibly the idea of a single representation for the euro zone in the IMF. It is a matter of urgency for the Community to make progress in its work on both of these subjects.
(F.R.)