Has real economy financing resumed? In addition to the declarations and conclusions of the main international bodies, the European debate on the economic and financial crisis focuses, above all, on what the banks should be doing and what their main activity ought to be: financing the real economy. A lot of other subjects are being discussed, such as supervision of financial activity. The legislative proposals on this, however, will not be ready until the autumn (23 September, as indicated by the Commission), whereas re-establishing the flows from banks to different companies is a matter of current concern, given the amount of liquidity the European Central Bank (ECB) has released at historically low rates of interest. What has been the result? The positions are proliferating and are far from being all the same. The different actors involved, as well as the press, are responding in accordance with their own interests or political convictions.
Unions allude to possible abuse. On behalf of the European Confederation of Trade Unions (ETUC), John Monks sharply criticised the potentially perverse aspects of the ECB's initiative that provided around a thousand private banks with €442bn at 1% interest. He pointed out that nothing compels these banks to resume lending to the real economy and that they can use this liquidity to relaunch creative financing or speculation on oil (which has already been observed) and other raw materials. ETUC experts add that the banks can immediately reinvest the amounts obtained at 1% interest in public bonds at 4%, mortgages at 5% or other services. The ECB must take action in the interest of the economy, jobs and citizens in general and not in the interest of the financial organisations, concluded Mr Monks.
At least one of the EU treasury or finance ministers took a position that was more or less the same as that of Mr Monks: Giulio Tremonti. On several occasions he painted a picture of the banks keeping their hands free to relaunch their financial manoeuvres for themselves and the speculators, which would be disastrous for the real economy. In a sarcastic aside he affirmed that “this year will be the year that the US and other banks obtain maximum profits because they are getting so much low cost liquidity. This will be an unforgettable year for the banks”. Mr Tremonti has just proposed, however, a sort of armistice for the banks in his country: if they extend the deadlines of repayments for certain ongoing loans and simplify the rules and conditions for new loans through transparent application of interest rates, good relations with the authorities could be re-established.
Banks' explanations. The other side provides several reasons to explain this prudence. Projects for financing have to be seriously evaluated in everyone's interest. Supporting projects that have no future or companies that do not deserve confidence would mean wasting available resources. Signs of a recovery in demand are crucial for investment to be justified and profitable.
A conflict between member states? Observers and European political players consider that the concerns about the attitude displayed by the banks, and about the conditions for a recovery in private investment, underpin the divergences between member states regarding the direction in which they ought to go. The United Kingdom and a few other countries, for whom financial activity represents a very significant part of their national product, are opposed to and will increasingly oppose regulation which they believe excessive and which obstructs this activity. Confronted with the scale of abuse committed and the disasters, no-one is overtly defending the failures of the past. The misgivings, however, are sufficiently clear for the German minister of finance, Peer Steinbrück, to have explicitly criticised the British authorities and City of London for putting a brake on attempts to introduce strict regulatory rules on the financial markets, and for displaying great reticence for what has been planned. He hears voices being raised that “call for a return to the situation before the crisis”.
Even if they are less explicit, some of the declarations made by Chancellor Merkel go in the same direction and demand that the principles of the social market economy be respected. Christine Lagarde, the French minister, denounced the lack of commitment by the banks in London and New York in applying the provisions on traders' bonuses, and Jean-Pierre Jouyet, the president of the French Financial Markets Authority (AMF), has announced a strategic plan to protect savers. He has also talked about a monitoring system that would be as pan-European as possible. The free movement of financial products in the EU is not being brought into question but the AMF would be able to warn the public at large about the dangers of a product and an “observatory on savings products” is being devised.
As we can see, the next round of European negotiations is not going to be a walk in the park.
(F.R./transl.rh)