Radical overhaul of financial architecture. The text the European Council adopted last Friday, outlining the positions European participants will defend at the G20 summit on 2 April, will enable the EU to play a spearhead role in the fight against the economic and financial crisis and move in the direction of a radical overhauling of the world of finance. The EU as it stands is not part of the G20 and it is all the more important that those representing it in this body reach common decisions. Annex I of the European Council's conclusions (published in No. 2516 in our Documents series that readers received at the end of last week with EUROPE 9866) is defined as a text adopted by common agreement. Its 24 points therefore constitute the European position.
Don't concede to US pressure. This column has attempted to synthesise the EU's direction by indicating that “it is aiming to radically amend the rules and guidelines governing the world of finance, above all, its monitoring”, while safeguarding responsible management of public debt. Some US sources wanted to lay down the law to Europe and criticised it for not having committed enough funding to underpin the economic recovery. It even went as far as denouncing the presumed negative effects of creating the Euro. José Manuel Barroso rejected the superficial comparisons between the sums committed to by the EU and US to tackle the crisis: “What the Europeans or Americans are doing should not be confused; our economic model is stronger because it includes a real social safety net…We should put a stop to making comparisons between the USA and Europe” (EUROPE 9865). Robert Toulemon, the former director general at the Commission's Economic and Financial Affairs Directorate General wrote that “giving in to pressures from Washington to massively increase European recovery plans would mean creating a real time bomb. The situation in Europe is a little less worrying than that in the US: the situation is less catastrophic for most financial institutions and there are social security safety nets”.
The European Council logically avoided any polemic with the US but its common text is clear. Europe is urging that budgetary measures be compatible with more long term targets on (in particular) the viability of public finances (point III) and is calling for a Charter for sustainable economic governance, which would constitute a first step towards comprehensive standards for global governance (point 10). The 24 points are sprinkled with explicit indications and call for: regulation and monitoring of all markets, without exception, whatever the country of domicile; coherent monitoring at an international level of “rating agencies”; a list of countries and territories that are not cooperating in transparency measures and where regulation is scarcely binding, such as off-shore centres; the elaboration of an arsenal of sanctions that facilitate application of appropriate and gradual counter-measures with regard to countries that do not cooperate; common principles on pay package practices and international cooperation on surveillance.
Guidelines for EU itself. All of the common text should be read. Europe is calling for a radical overhaul of global financial management. For the EU itself, in relation to surveillance, the European Council's conclusions explicitly refer to the report by the group presided by Jacques de Larosière and the calendar outlined by José Manuel Barroso. I would like to point out that in connection to this calendar, the Commission will present a proposal at the end of May on the architecture of a European financial system based on the conclusions of the Larosière report in view of the June European Council. In the autumn, it will present its legislative proposals that are also inspired by the Larosière report.
The EU has also clarified aspects of the situation within the Community. Where banking secrecy exists, it will not be an untouchable rule but subject to several derogations even if no EU country is on the list of countries failing to collaborate in transparency initiatives. Moreover, in addition to what will be discussed at the G20, the EU has doubled the ways of supporting member states not in the eurozone and it confirmed (through informal but explicit declarations) that there are instruments for intervening if necessary in support of countries experiencing difficulty in this zone.
Criticising European action is quite easy and it can pay off but it would be also be more honest to recognise what it has done.
(F.R./transl.rh)