EU to speak with single voice but … The fact that the EU is seeking to present as common a position as possible at the G20 meeting in Pittsburgh (see yesterday's column) does not mean that member states necessarily agree on all aspects of reform in the world of finance. Progress, however, has been considerable, far beyond hopes and expectations. Without waiting for the informal summit, France, Germany and the United Kingdom had stepped up the effort to define a number of guidelines that are as universal as possible, made explicit in several, largely public stances (trilateral or bilateral) and for which the essence and spirit is to be found in the text adopted by common agreement of the European Council.
What has now been acquired will be put to the G20 in Pittsburgh. With what results in mind? Differences with three emerging giants - China, Brazil and India - particularly concern power-sharing within the IMF and the World Bank, and above all the major global issue that runs in parallel to financial governance - that of the fight against climate change. Two aspects are especially controversial: the effort that emerging countries must make to reduce their carbon emissions, and their participation in the financial support of the poorest countries. However, such aspects will not be discussed in detail in Pittsburgh, except as a preparation for the conference in Copenhagen. On the other hand, the different tracks taken by the EU and the United States directly concern monetary governance. All US guidelines are not yet clear, however, due to the discrepancy between President Obama and part of Congress, between financial circles and public opinion. Nonetheless, according to most observers, there has been a change of mentality in the US that is just as radical as that in Europe.
European guidelines. On the European side, a schematic reminder that is necessarily no more than an indication is: a) rating agencies: there is broad consensus for new regulation allowing conflicts of interest to be avoided and methodology to be improved; b) supervision: on Wednesday, the European Commission is to present its legislative proposals. It is not easy to reconcile the stance in favour of a European regulator (the Committee of European Securities Regulators, CESR) with that of simple coordination between national regulators. At any rate, market surveillance, investigations and the control of operators will remain national, while the interpretation of European rules and consistency of application would become European; c) prudential supervision of banks, balance sheet structure: the texts are there but their uniform application raises problems; d) uncovered sales: there should be a framework for this technique but opinions differ over how this should be done; e) organisation of regulated markets: there are difficulties in application of the rules in force; f) hedge funds: projects are being discussed and not all views converge; g) remuneration: European guidelines were spelled out in the joint text of the Informal Summit. France considers that its model deserves to be taken on board with, in particular: the ban on bonuses guaranteed for more than one year, the payment of bonuses spread out over time, the establishment of the malus system applicable to traders whose positions, which justified bonuses, later prove unsuccessful; h) tax havens: Decisions must be consolidated and strengthened, including retaliatory measures to be implemented as of March towards countries or territories that do not cooperate (position set out in the text of the European Council).
With or without the United Kingdom? Will the EU, when the time comes, manage to define common solutions on all the abovementioned issues? The guidelines summarised are, of course, considered defective or insufficient by a number of political forces (see yesterday's bulletin for the criticism voiced by the European Socialist party and trade unions). However, all member states acknowledge that the time for auto-regulation is past and that controls must be introduced. The main question is that of knowing whether the British, while recognising the need for reform, might not prefer to define it themselves. On the Continent, it is felt that every effort must be made to jointly develop new rules valid for the whole of the EU, while adding that, in the event of failure, the eurozone countries must move forward among themselves. Some areas where the role of the ECB (European Central Bank) is essential may be regulated separately between the Continent and the UK but, for general regulation, it is in the interest of the UK itself that uniform rules and common surveillance systems be set in place. In London, one should not forget that it is the UK that benefits the most from the internal market of financial services. (F.R./transl.jl)