Brussels, 06/10/2008 (Agence Europe) - On Saturday 4 October, the heads of state or government of the European G8 member countries (France, Germany, Italy and the United Kingdom) undertook to work together to tackle the financial crisis. The statement adopted at the meeting, which was also attended by Messrs Juncker, Barroso and Trichet, presidents of the Eurogroup, the European Commission and the European Central Bank respectively, said that this was a commitment to “ensure the soundness and stability of our banking and financial system” and one that required them to take account of potential effects on neighbours of national decisions. For the moment, however, emergency responses to save banks from bankruptcy and restore confidence are continuing in member states. Some countries, such as Italy and the Netherlands, would appear still to hope that a European assistance fund for banks can be set up. This move, however, is not supported by Germany, but, in all probability, it will come to the fore once again and be discussed on Monday evening
6 October at the meeting of the Eurogroup in Luxembourg.
In their statement on Saturday, the four European G8 members said they wanted an international summit “as soon as possible” with a view to “effective and comprehensive reform of the global financial system in line with the principles of transparency, sound banking, responsibility, integrity and global governance”. Thus, “such a reform should notably be underpinned by a comprehensive framework of supervision” and “all parties with a significant financial impact should be appropriately regulated or under surveillance”. This, then, should involve investment funds, such as hedge and private equity funds. If public support is needed for banks in difficult situations, then there have to be measures to protect taxpayers, to recognise the responsibility of managers, to have shareholders bear their share of the burden and to provide appropriate protection of the legitimate interests of competitors, the statement says. It goes on to announce amendments to accounting standards and the way they are interpreted. An initial objective is to allow European banks, by the end of the month, to free themselves from “fair value” rules when assessing their assets. Similarly, given the current exceptional circumstances, the Commission will show “flexibility in its state aid decisions” and the Stability and Growth Pact (SGP) rules will also be applied accordingly. The revised SGP does, indeed, allow a certain flexibility, but “that does not mean that deficits will now be allowed to grow,” Jean-Claude Juncker said on Saturday.
In an attempt to remedy a situation which could prove detrimental (through competition distortion), European leaders called for coordinated development of European deposit guarantee rules. Their statement welcomes the Commission's intention to bring forward, “in the near future”, a legislative proposal (providing for an increase in minimum guarantees and a reduction in timescale for repayment). This proposal will be brought forward “as soon as possible”, said a Commission spokesman on Monday. Several governments have already announced that they would guarantee all the savings in their national banks (see related article) and, on Sunday, Germany decided to follow suit, announcing that it would provide an unlimited guarantee for all private savings in German banks. On the same day, the United Kingdom increased its minimum deposit guarantee (from £35,000 to £50,000, and possibly even to £100,000) and Austria and Greece are considering a similar move. But is this kind of national response within the spirit of cooperation decreed at the weekend? Yes, because “all the players face great demands and all are showing they want to cooperate,” said the Commission spokesman, who is not fearful of a weakening of Community competition or SGP rules. The “by invitation only” meeting had been “very useful for Europe”; it did not prejudge discussions and decisions to be taken by all 27 member states, and merely put forward a few avenues for investigation, he added.
Most of these avenues were already there, noted French Socialist and chairwoman of the European Parliament economic and monetary affairs committee Pervenche Berès, opining that the “4+3” meeting held just before an Ecofin Council did not perhaps demonstrate the added value of better European coordination. “The current situation, in which everyone is working away on his own, is the worst of all situations,” she said, adding that she could not see anything in the conclusions that “would allow Europeans to work together in a coordinated and concerted way” ahead of the forthcoming G8. She feared that once the pressure of the crisis had passed, real mechanisms providing better arming for the euro area would not have been put in place for supervision. Cross-border financial crisis management simulations have already demonstrated gaps in coordination and “everyone knows that it didn't work”. (A.B./transl.rt)