Situation of the world financial system and its consequences on the European markets (debate)
The next item is the Council and Commission statements on the situation of the world financial system and its consequences on the European markets.
President-in-Office of the Council. - (FR) Madam President, Commissioner, ladies and gentlemen, we are witnessing the end of an era. The next few years will change the face of world finance as we know it. We have to deal not only with the US crisis but with a crisis affecting the international financial system and sparing no region of the world.
For a number years, there had been criticism of the growing imbalances in the financial sector: an unreasonable exposure to risks for many players, the relative inability of financial controllers to keep in check the rapid introduction of increasingly complex financial products and, as the Commission will no doubt mention, a taste, too marked for some, for greed. Now we are seeing the results. The US financial sector is in turmoil and the US authorities have been forced to intervene more and more heavily to avert a full-scale crisis. Europe and the rest of the world are experiencing fallout from this crisis at a level not known since the 1930s.
The French Presidency is convinced that the events of the past few days make a strong and united Europe even more necessary on the economic and financial stage. We must first come up with an immediate response to the financial disruptions. In the European Central Bank the Economic and Monetary Union has a powerful central bank that has been able to intervene promptly, resolutely and effectively when tensions have been at their highest, in close cooperation with the other major central banks. This is a considerable asset in these turbulent times and we should praise the actions of the European Central Bank, which is ready to step in in any situation.
Faced with the worsening disruption of the last few days, the regulatory authorities in the majority of Member States have decided, like the US authorities, to issue a temporary ban on short sales. This is an emergency measure, but it is welcome as it can help to the calm the tension on the markets.
At present, we do not envisage the type of initiative just announced by the US federal authorities for the large-scale buy-back of 'toxic' products held by financial players, and Mr Almunia was right in what he said in this regard.
The Union's financial system remains robust overall and there is therefore no call for this type of measure, but we must remain vigilant, and nothing can be ruled out in the name of whatever ideology. Realism and pragmatism are the order of the day. If necessary, we will have to address possible systemic risks using the means at our disposal.
Emergency interventions by central banks and regulators are vital, but all experts recognise that they cannot resolve the crisis by themselves. Europeans must face up to their responsibilities and intervene in the other areas in question.
We must respond to the economic slowdown. This was the subject of the joint European approach adopted by the Ministers of the Economy and Finance at an informal Council in Nice. The Ministers, together with the Commission and the President of the European Central Bank, decided to leave the automatic stabilisers to operate freely as regards budgetary matters in those Member States with room for manoeuvre.
They also approved a finance plan for European SMEs, with EUR 30 billion to be provided by the European Investment Bank between now and 2011, which will lend the sector substantial support, as, paradoxically, even though the financial crisis in Europe is less pronounced than in the US, there are just as many risks to the real economy. A stable financial system and robust banks can be called on to restrict or to increase the cost of loans as necessary, particularly in the case of SMEs. Direct action was required with regard to the latter.
We must also reform our financial system along two main lines: the first is prompt legislative and regulatory measures to restore the transparency of the financial system and make financial players accountable. With this in mind, on 13 September 2008 Ministers showed their determination to speed up the implementation of the roadmap adopted in 2007 to respond to the initial signs of the financial crisis. This roadmap sets out four key measures to address the financial turmoil: transparency, prudential rules, the valuation of assets and the functioning of the markets, including credit rating agencies.
It is now time to deliver on the supervision of credit rating agencies, the revision of banking controls and the adaptation of accounting standards, which have undoubtedly played a procyclical role in the financial arena. This is a real priority for the French Presidency and we will discuss it at the next European Council. The Commissioner will confirm this, but I believe that the Commission will shortly propose that the directives in force since 2006 concerning the requirements for own funds should be amended.
This is one of the measures currently under way in various areas to tackle the financial turmoil, which, of course, also include the recent recommendations drafted by the Financial Stability Forum. I know that the Commission will able to table these proposals very quickly and we are counting on Parliament to reach an agreement with the Council at first reading, before the end of the present term, on these urgent proposals.
A proposal concerning credit agencies is also expected from the Commission in a few weeks' time. It will follow on from the request issued by the July 2008 Council of Finance Ministers and, in this regard too, I am counting on Parliament to reach an agreement on this ambitious proposal as quickly as possible.
I also note with satisfaction that a decision has been taken to set up a working group to examine how the prudential supervision of banks and insurance companies should take account of the cyclical nature of developments, particularly as regards capital. Specific measures should also follow.
These are the essential components of financial sector reform and will most probably be accompanied by other initiatives, as European examination of the financial crisis progresses. Parliament must play its full role in this examination and the Presidency notes with great interest the recent contributions the institution has made. I am thinking, in particular, of hedge funds, which some experts say could be the next victims of the crisis. I am also thinking, as I said earlier, of the issue of accounting standards but also that of financial sector salaries, on which we must take immediate action.
Saying, as I have heard from some European leaders, that we must continue in our laissez-faire approach and that no regulation is necessary is a mistake. It is more than a mistake: it is an assault on the stability of the financial system; it is an assault on reason. I shall be plain about this: if we need to consider regulating hedge funds, then the European Union must do so. We must think about the transparency of risks, the supervisory powers of regulators and the salaries at this type of institution.
The second basic line of approach is to strengthen financial supervision. The Finance Ministers welcomed the agreement by the European committees of regulators on the harmonisation by 2012 of the requirements for data transmitted by European banks to the supervisory authorities. These are the first significant results, but they must be followed by others, and the Ministers have agreed to continue their efforts to improve the coordination of the monitoring and supervision of financial players. The Presidency is ready to work with Parliament and the Commission to strengthen the integration of supervision and prudential monitoring of groups that are increasingly cross-border in nature. The Union requires a more effective and more integrated supervisory system in order to be better equipped to tackle financial crises.
Ladies and gentlemen, France is presiding over the Council of the European Union at a time of great disruption. In these difficult circumstances, we are fully aware of our responsibilities. The time has come to take important decisions with regard to the organisation of our financial system, its place within the European economy and its role, which should remain the financing of businesses and individuals.
The Union has not been idle over these last few months. The Presidency can therefore draw on the reflections made and work carried out by the Commission in this area, as well as on the work of a number of experts, including, in France, Mr Ricol.
The October European Council provides an opportunity to set strict guidelines at European level: that is our aim. It is clear that Europe should not act alone. It needs to be proactive and encourage fresh international cooperation, as President Sarkozy said at the United Nations yesterday. We also propose to hold an international meeting before the end of the year involving the G8 and their financial regulatory authorities. Our goal is to help to produce the first principles and new joint international rules for an overhaul of the international financial system.
The European Union is showing, through an initiative of this kind, the importance it attaches to a new, balanced world governance. The European and international response must address the short, medium and long term. In the short term, we need emergency measures; in the medium term, a revision of our legislation; and in the long term, a more comprehensive examination of the role of our economic model in terms of growth and employment and the continuation of structural reforms, which remain essential.
This concludes the information I wished to provide you with today.
Member of the Commission. - Madam President, the series of events we have witnessed in financial markets during the last year, and in particular during the last few days, are of a magnitude that exceeds anything we have seen in our lifetime. Many believe - and I tend to agree - that this will trigger important changes in the functioning of the international financial system.
Since the outbreak of the crisis in August 2007, disclosed losses have totalled more than USD 500 billion, a sum equivalent to the GDP of a country like Sweden. And, unfortunately, the final figure is considered to be larger still.
The acceleration of declared losses in the US during the last few weeks, and the subsequent decline in investor confidence, have pushed several major financial institutions to the brink of collapse. In cases where the fall of one of these institutions would have implied a systemic risk - that is to say, put the entire financial system at risk - emergency rescue operations have been required.
Some of these rescue operations took the form of public interventions, such as those carried out by the US Treasury and the Federal Reserve to avoid the bankruptcy of the world's largest insurance company, AIG, or of the mortgage financiers Fannie Mae and Freddie Mac, that together underwrite half of all mortgages in the US.
Others took the form of private takeovers, such as the purchase of the investment bank Merrill Lynch by Bank of America.
For others, like the case of investment banker Lehman Brothers or almost two dozen US regional banks, bankruptcy was the only option possible. In short, we have witnessed an extraordinary transformation in the US banking landscape.
Consequently, we have reached the point where the US financial system is facing a substantial confidence problem. At this juncture, according to the US authorities, a series of bail-outs is not the answer any more. A systemic solution is urgently needed.
In the short term we all need a response that will restore confidence and stabilise markets.
The US plan announced by Secretary Paulson last week is a good initiative. In short, the US Treasury Secretary proposes to set up a federal fund to remove from the banks' balance sheets the illiquid assets - those mortgage-linked securities that are at the root of the problems we face. Removing these from the system would help to remove uncertainty and refocus the market on fundamentals. However, the details of this proposal need to be properly defined - and quickly - if it is to succeed.
I should say that we are talking about a US plan, adapted for the circumstances in the US, where - it should be recalled - the crisis originated and where the financial sector has been most severely affected. But we all have to analyse why this has happened. We all have to cope with the consequences and react to the present situation.
To do this, we first have to understand how we arrived at this point. The origins of the turmoil we see today lie in the persisting global imbalances in the world economy, which created an environment of high availability of liquidity and poor assessment of risks.
The interconnection of global financial markets, the high level of leverage and the use of innovative and complex financial techniques and instruments, which were only poorly understood, caused these risks to spread across the international financial system on an unprecedented scale.
What is clear is that market participants - but also regulators and supervisors - were unable to properly understand the risks of this situation and, therefore, could not prevent the consequences that we see today.
True, in the months leading up to the crisis, the IMF, the European Central Bank and the Commission, among others, all warned of these underlying risks. We knew the situation was unsustainable, but what we could not know, and what no one was able to predict, was how, when and just how violently the crisis would be triggered by rising defaults in the sub-prime mortgage sector.
What we are now seeing is the process of the last few years going into reverse, with the financial system grappling with the consequent need to deleverage. Because of the exceptionally high leverage and the scale of linkages between risks, this process of unwinding is proving particularly painful. The lack of transparency in the system and the inability of supervisors to piece together an accurate and complete picture of the situation, has led to a dramatic fall in confidence.
The financial sector has been most severely affected, as nervousness among banks has caused liquidity to dry up in the interbank lending market.
Several key credit markets remain disrupted, and recently there has been a renewed flight to quality among investors, accompanied by widening spreads between benchmark bond yields and yields on relatively risky investments.
Thanks to the swift and coordinated intervention by central banks - with a relevant role here for the ECB - we have managed to avoid a severe liquidity shortage. Nevertheless, banks remain under pressure. The crisis of confidence has provoked a fall in asset prices, compounding the strain on banks' balance sheets. Combined with the situation in the interbank market, banks face difficulties to recapitalise.
The situation we face here in Europe is less acute, and Member States do not, at this point, consider that a US-style plan is needed.
Taking a medium-term perspective, it is evident that we need a more comprehensive structural response. The latest events in financial markets have made it clear that the current model of regulation and supervision needs to be revamped.
In the short term, we rapidly need to address the weaknesses in the current framework, and in this respect - and I fully agree with the Council position - the ECOFIN road map of regulatory actions and the recommendations of the Financial Stability Forum contain all the elements necessary. As you know, this includes concrete initiatives on enhanced transparency for investors, markets and regulators; revised capital requirements for banking groups, and clarification of the role of credit-rating agencies.
Work is progressing at the Commission, and the Commission will soon come forward with proposals on a revision to the Capital Requirements Directive - next week - and new legislation on credit-rating agencies, I hope, before the end of October. But given the latest developments, it is likely that we will need to explore additional issues that have come to light.
We will continue to discuss what else should be done to better ensure financial stability and to correct the reasons underlying this crisis, and in this regard I fully share the words of welcome that the Presidency of the Council gave to your contributions.
Finally, let me turn to the impact of the financial sector crisis on the economy - on the real economy. There can be no doubt that events in the financial sector are hurting the real economy. These effects have been compounded by the inflationary pressures of the rising oil and other commodity prices and the severe housing-market corrections in some Member States. This combination of shocks has impacted directly on economic activity through higher costs and negative wealth effects and, indirectly, via a sharp erosion of economic confidence. The result has been a brake on domestic demand at a time when external demand is fading.
Leading indicators on economic activity point to a marked deceleration in the underlying growth momentum both in the EU and in the euro area. Against this background, GDP growth for this year was revised down significantly in our last interim forecast to 1.4% in the EU and 1.3% in the euro area. At the same time, for this year inflation forecasts have been revised up to 3.8% in the EU and 3.6% in the euro area. Inflation could, however, be at a turning point, as the impact of past increases in energy and food prices gradually fades in the coming months. This could possibly be reinforced by a further downward correction in oil and other commodity prices, although this remains to be seen.
Overall, the economic situation and outlook remain unusually uncertain. Risks to the growth outlook remain on the downside, while risks to the inflation outlook are on the upside. These uncertainties are even higher regarding economic developments next year, but we expect growth in both the EU and the euro area to remain relatively weak next year.
How should we respond to this economic slowdown? The best answer is to make use of all the policy instruments we have at our disposal.
Firstly, in budgetary policy, we must preserve our commitment to fiscal discipline and the rules of the Stability and Growth Pact while letting the automatic stabilisers play their role. In this regard, the reform of the pact in 2005 is proving very helpful.
Secondly, a clear commitment to implement structural reforms, as defined in the framework of the Lisbon Strategy and the national reform programmes, would be crucial to boost consumer and investor confidence in the short term and to improve the resilience and dynamism of our economies in the longer term. Measures to strengthen competition in retail and energy markets and improve the functioning of our labour markets would be particularly valuable at this juncture.
Finally, delivering improvements in financial-market regulation and meeting the goals of the ECOFIN road map is, as I have already stressed, more urgent than ever before. An effective and rapid solution to the difficult challenges we are facing could go a long way to restore confidence quicker than expected and limit the damage to our economies.
In each of these policy areas our actions will be more efficient and effective if we coordinate them at the euro area and European Union level.
Inevitably, we will need to overcome some resistance by Member States to agree common action, yet the consensus we reached during the last informal ECOFIN meeting in Nice should be deepened and developed.
European countries face common challenges. We will overcome them most effectively if we work together to find common solutions. In this respect, the Economic and Monetary Union is a formidable asset, and we should exploit the opportunities it provides to strengthen coordination, along the lines we proposed in our EMU@10 report and communication last May.
However, events make clear that internal European action is not sufficient to confront global challenges. We need to reinforce common external action in the Financial Stability Forum, in the Basel Committee, in the G7, as well as devoting more attention to the future role of the International Monetary Fund.
Looking ahead, we need to think about how we can shape the future of our financial systems and global governance, and the role of the European Union in this regard is vital. Europe can be a driving force behind reinforcing global coordination and should take a leading role in international debates in this area, and this first requires European countries to work together and agree on internal solutions.
on behalf of the PPE-DE Group. - (DE) Madam President, Mr President-in-Office of the Council, Commissioner, ladies and gentlemen, listening to the Commissioner's statement just now, it felt as if I was in the wrong film. He repeatedly emphasised that swift and rapid action is being taken. In reality, the only thing that has moved swiftly in recent weeks, months and years is the market, which is frequently invoked in our regular debates here. The fact is that the market regulated the problem of the investment banks very quickly on its own. We were unable to react as swiftly.
'Swift' is certainly not the word that we can use when we look at the Council and particularly the Commission. We are now being kindly invited by the Americans to pay a share. I do not wish to comment on that at this juncture. It is enough, at this stage, to monitor developments. However, what I expect from the Council - although when it comes to the Commission, I am not sure whether the Barroso Commission is capable of this - is to ensure, at the least, that we overcome the American and British resistance to transparency in the financial markets. I need only remind you of the German Presidency, when President Sarkozy and Chancellor Merkel came up with an initiative and the Barroso Commission sat back and said, 'Who is Sarkozy and who is Merkel anyway?' and took no action.
'Swift' is really not the word we can use. I need only remind you of Enron and Parmalat. At the time, the European Parliament had adopted a relevant report by Mr Katiforis - I was the shadow rapporteur - on the issue of credit rating agencies. That was back in 2003. Now, in October 2008, the Commission may well present proposals, but the IOSCO is already saying that we should not deviate from the Securities and Exchange Commission and US rules, for otherwise the international financial system will be disrupted.
Europe must go its own way here. That is why I do not really care what the SEC is proposing, and if the Commission plans to move in the same direction as the SEC, all I can say is that it should wrap up warmly. We must do what we think is right, and the Americans can then follow us. That is all I have to say about rating agencies.
It has been said that we should deal with the revision of Basel II at one reading. I hope that the Council representative is listening, as that is something that he mentioned. We can do it at one reading, as long as the Council gives up its opposition to a European supervisory regime. What the Council has achieved so far through its closer cooperation with the European supervisory authorities is lamentable. Nice was based on intergovernmental cooperation. That being the case, the Council should jump over its own shadow for once and think along European lines.
Hedge funds have also been mentioned, along with private equity. Commissioner McCreevy told the House only this week that we must not be overhasty. We can accuse Mr McCreevy of many things, but being overhasty is not one of them.
(Heckling and applause)
I have regularly attacked Mr McCreevy in the House on the issue of hedge funds and private equity. We must ensure that the Commission now presents proper analyses and does not remain in a state of denial. This is no longer Mr McCreevy's problem; it is now Mr Barroso's problem.
(Applause)
I would be delighted if we were now to make it clear to the US that the SEC - the Securities and Exchange Commission - should put its own house in order for once. Siemens is the subject of a rigorous investigation, but no one looks at the US. I expect the Commission and the Council to enable us to set out a European policy course in this area.
(Applause)
on behalf of the PSE Group. - (DE) Madam President, we have listened very attentively to what Mr Radwan has to say. The Bavarian election campaign casts a long shadow. Yes, Mr Radwan, some of what you say is absolutely right. The market has regulated it, but the US taxpayer is footing the bill. It is the state which is paying the price.
What we are witnessing at present is not only the bankruptcy of investment banks and major insurance companies. It is the bankruptcy of an economic philosophy which has been 'sold' to us for years: a philosophy which claims that in a supposedly modern economy, growth and prosperity are generated through speculation, not in the real world. That is the system that is going bankrupt now.
(Applause)
Incidentally, Mr Radwan, we have a very clear memory of the Katiforis report. You are an astute politician, I will give you that. You are standing for election to the Bavarian State Parliament on Sunday. Good luck with that. However, the person who applied the brakes to the Katiforis report was you, Mr Radwan. That is also something that we recall very clearly.
Charlie McCreevy is not here, which is a pity. Joaquín Almunia has presented a very sound analysis. Commissioner Almunia, I would ask you to brief your colleague Mr McCreevy on the measures which are necessary and which we must now adopt. I do not know where he is. Perhaps he is back at the race track; perhaps the betting shops at the race track are better regulated than the international financial markets. However, one thing is clear: we expect the Commission to adopt the measures that are possible and necessary, and we expect this action by the end of the year, or by spring at the latest.
This means, for example, adopting rules for the credit rating agencies, and doing so very swiftly. It is vital, too, to decouple City bonuses from short-term speculative profits. That is a very important point. If a manager knows that he himself will bank 5% of a billion that he generates in speculative profits, because his bonus is coupled to the speculative billion, then it is only human nature that he will attempt to generate the billion in profits by whatever means, whatever the cost: even if tens of thousands of jobs are lost as a result, which is what we have seen happening all over the world in recent decades.
Without turning a hair, the financial managers - the smart young things we run into here in the corridors - are wrecking entire companies and entire business locations, with all the social ills that this entails. The costs of this devastation are included in the 700 billion which the US taxpayers now have to invest in rescuing the major banks and insurance companies. The amateurism of governance in the US is apparent from the fact that even in this massive crisis, it is these major corporations which are being rescued, costing ordinary taxpayers more than 700 billion dollars from the US budget. Unfortunately, the fates of these ordinary taxpayers, their debts and mortgages do not feature in the US Government's rescue plan. A perfect example, once again, of how profits are privatised and losses nationalised. That must stop as well.
(Applause)
We heard all about it in Monday's debate. I almost have the impression that we should be handing out membership forms for the Social Democratic Party to the PPE-DE Group: it seems that they cannot change their opinions fast enough, and the Liberals, I have to say, are even worse.
In a debate last November about the European Union's role in globalisation, I made the following comment: 'The Wild West capitalism that dominates the financial markets is threatening entire economies, including the US economy now, and needs international rules. We need control, transparency and restrictions on the power of the financial markets.' In response, the leader of the ALDE said: 'Mr President, we have just heard the language of the past'. At least he is not present for today's debate, which will obviously enhance its quality. What I said, however, was not the language of the past. Now, more than ever, control and government supervision of a deregulated market - which has no respect for anything or anyone - are the way forward.
I therefore have one thing to add, if I may. Of course, we must act swiftly, but we also must act in the area which is closest to my heart and the hearts of my colleagues here in the European Parliament. The speculation bubble will not burst: even if we ban short sales for the time being, they will be back. Another thing which we are bound to see happen again is that investors will be encouraged to speculate on rising food prices, for example. Food price rises occur when there is less food available. That means that those who have an interest in high food prices must ensure that the supply of food is reduced. However, food scarcity means hunger in the world, and if we have a system which makes it possible for hunger in some regions of the world to generate profits in others, our 700 billion dollar rescue package will not help us. Sooner or later, the system, in all its perversity, will have bitter consequences for humankind as a whole.
What we are discussing here, then, is not about short-term necessity. It is about how we can guarantee humane social development for the long term.
on behalf of the ALDE Group. - (DE) Madam President, ladies and gentlemen, the global financial crisis has spread through the markets with unforeseeable consequences. Some people may feel a sense of satisfaction at the sight of bankers falling from grace and losing their jobs. However, this is very short-sighted, for the real losers are not the company bosses or the traders. It is ordinary families who are hardest hit by the credit crunch and the collapse in the value of shares and savings. It is their financial security which is shattered when the value of pensions and savings is put at risk.
That is why it is essential to undertake a precise analysis of the financial crisis and its causes to ensure that it does not happen again, and I am pleased that we are doing so today. Martin Schulz used his speech to rail against the markets. In light of Mr Schulz's predictions last November, which he has kindly reminded us of, this might give him the chance to earn some extra income as an oracle. However, it is money which drives the markets, not hot air, and he needs to recognise that fact.
The appropriate response to the current crisis is not a move away from free enterprise. It is enterprise which creates jobs and prosperity. Do the financial markets really need more regulation? Ludwig Erhard, the father of the German economic miracle, summed it up neatly. He said that the state should establish the rules for the economy and the financial system, but like a referee, it should not involve itself in the game. What this means, of course, is that it must take action against fouls and violations of the rules.
Regulation is appropriate and necessary in order to avoid excesses, but it is not the market economy which is to blame for the crisis; that blame attaches to those who refuse to abide by frameworks and rules. For years, experts have been warning against high-risk loans, unsecured credit and a bubble waiting to burst in the financial and property markets. We need common and transparent rules for Europe as a whole, and for the world. Yes, we need international controls, but with a sense of proportion. It is no good to anyone if we immobilise capital movements with more rules and trigger an economic downturn.
Above all, we need to restore confidence in a free and open market. The economic stability of Europe's and the world's citizens depends on whether we show ourselves to be capable of action. However, the international markets will not stop and wait for decisions in Europe, and nor will they wait for Parliament to make its pronouncements.
Commissioner, Minister Jouyet, my group is expecting you to take rapid, rational and successful action, and to do so now.
on behalf of the UEN Group. - Madam President, the President of the European Central Bank, Jean-Claude Trichet, recently said that, when the market stabilises, we will not return to business as usual, but instead we will experience a new normality.
Given the failings and weaknesses in the market and institutions that have been brought to light in devastating fashion over the last year, a move away from the abuses and faults of the past is only to be welcomed. The financial crisis has caused terrible panic, but it has also served to emphasise the need to eliminate obscurities and to introduce transparency, and for we legislators to regulate. But we also must avoid panic, because if we panic we will make poor decisions.
In the US, out of the scramble to avert catastrophe, radical alterations to the landscape of high finance are emerging. Our institutions have stood steadier than those in the States - understandably as the crisis originated across the Atlantic - yet certain cases are a reminder that we are in no way invulnerable. To ensure the stability of our markets in the future, we must implement structural and systematic reforms and be prepared to act quickly. There may be three things that will happen or have happened already, such as reforms - for example ensuring that central banks prevent runs on banks and financial institutions - and there has been significant action in this regard already. Secondly, treasuries must remove the reason for runs occurring in the first place, namely the presence of distressed assets in the balance sheets of financial institutions. Lastly, it is pivotal for the financial system to be recapitalised.
We have passed the initial stages of the crisis. The effects on banking and the political response to this initial trauma will not be known for some time. However, we now have to face up to ensuring that the new financial reality that emerges from the other end of this crisis is a strong and healthy one. To this end, it is necessary to address the root of the crisis and to remove distressed assets and clean up balance sheets. To emerge from the quagmire of the crisis, it is also necessary, for both localised and global economic health, to show there is sufficient capital in the finance system. Whether this is from public or private injection or a combination of both is another discussion, but we must have one soon.
We do not know yet what the full and lasting impact of the world's financial crisis and its consequences on European markets will be. However, what we do know is that, to emerge standing from this crisis and to be sure that investors, markets and citizens are protected in the new normality that will result, we must keep our heads - even in time of doubt and turmoil - and take concrete steps towards implementing structural and systematic reforms that will safeguard the health of our European system and the financial well-being of citizens of European countries and globally.
on behalf of the GUE/NGL Group. - (FR) Madam President, if the main European leaders wished to illustrate the gulf separating them from European citizens, they need only react as they did to the financial crisis following the meeting of Finance Ministers on 14 September 2008.
What are the main measures that have been announced, apart from a welcome but insufficient increase of EIB loans to small and medium-sized enterprises?
They can be summarised in three points. Firstly, as regards hopes for a fiscal stimulus, I quote Jean-Claude Juncker: 'We have ruled out adopting a European revival plan.' We are going to apply the Stability Pact, the whole Pact and nothing but the Pact.
Next, with regard to the deregulation process under way, I quote Christine Lagarde: 'We must not allow any slowing-down of the structural reforms'; Jean-Claude Trichet: 'Anything that can be done to improve the flexibility of the economy is good enough for us'; and Jean-Claude Juncker: 'We must reform the labour market and the markets in goods and services. Competitiveness needs a bigger playing field.'
Finally, the question on all our minds is who should foot the bill? Again, I quote Jean-Claude Trichet: 'Banking watchdogs should not have disproportionate requirements regarding credit agencies', and, on the other hand, according to Jean-Claude Juncker: 'Everything must be done to prevent salaries from getting out of hand'.
We wish to tell them this: come out of your bubble and try to put yourself in other people's position. They see, on the one hand, finance ministers moving heaven and earth for the major global speculators - a sum of EUR 110 billion has been released by the ECB alone - and, on the other, the employees who are at risk. In attempting to reassure the markets, you are unsettling companies.
The truth is that, in the name of the free movement of capital and the famous open market economy with its free competition, financial leaders have collectively fuelled devilish mechanisms that they can no longer control. Let me remind you that, five months after the beginning of the subprime crisis, Mr Trichet, representing the 10 main world central banks, was still talking only of simple 'market corrections' and announcing 'robust growth, even if there is a slight slowdown'. Three months later, he was urging Parliament's Committee on Economic and Monetary Affairs to 'give the private sector a chance to rectify itself'. What insight! If a system can lose its own cronies in this way, it is in the midst of an existential crisis.
This is why, if we wish to avoid further increasingly painful collapses, we must have the courage to make a break. Firstly, we must break with the idea of productivity based on the lowering of salary costs and social expenditure. We must reverse the continuing trend of reducing the share of salaries in added value. That is not the source of inflation; it is the immoral actions of financial operators.
Secondly, we must end the complete reliance on financial markets to fuel the economy, as they are not feeding but poisoning it. The European Central Bank has a decisive role to play in directing money towards a socially effective economy, one that creates jobs, promotes training and develops public services, that ensures sustainable production and useful services, that has a place for research and development, respects public enterprises and the public interest and puts cooperation above economic warfare.
However, to achieve that, the mission of the European Central Bank must change. It should refinance banks at very different interest rates depending on whether the loans benefit the sound economy I have just described or, on the contrary, are to be used as the basis of unsavoury financial operations. The conditions of access to loans should be advantageous in the former case and extremely dissuasive in the second. At the same time, rigorous controls are needed with regard to banks and funds and a tax should be introduced on financial capital movements. Finally, work should begin on radically reforming international economic institutions, as called for recently by President Lula in his address to the United Nations.
Thirdly, there needs to be an end to the self-satisfaction and condescension of a small elite explaining to citizens that the only valid choice is its own. If we could at least discuss all this seriously with an open mind and a sense of responsibility, then the crisis would, in one respect, have brought some benefit.
on behalf of the IND/DEM Group. - (DA) Madam President, the first news item when I switched on the car radio on my way to the airport early on Monday morning was that my bank was undergoing a serious financial crisis. Fortunately I am just a saver so I shall not lose any money - but shareholders are in tears. The worldwide financial crisis has reached my little bank. The heart of the problem lies in the development of globalisation - not least the right for capital to move freely across borders. We have seen unheard-of speculation, with no aim other than a profit for some owners. This practice only goes to harm the real economy, just as we are seeing now, with speculation on the US housing market triggering an international financial crisis.
Therefore, there should be an end to the thinking that the free movement of capital is the way to growth and wealth. This free movement only benefits speculators and tax evaders. I dare say that ordinary citizens and people wishing to invest in companies and finance the purchase and sale of goods can live with controls on who moves large amounts of money across borders and for what purpose. Controls on capital movements would give democracy greater insight and opportunity for influence.
What is the solution to the immediate crisis, then? A safety net funded by taxpayers is guaranteed to increase aggressive, speculative foreign policy in the financial sector and promote the worst of capitalism. The banks themselves must clear up after crashes and crises; it is not up to national banks and thus taxpayers to do this. Danish financial consultant Kim Valentin suggests a rescue fund financed by the banks themselves. It is crucial that the banks' contribution to the new fund is large enough to give them a real interest in keeping an eye on one another and intervening when a crisis looms, as they themselves must pay to clear it up.
I propose that we use the EU to lay down tough rules on the size of banks' rescue funds. This would also help us fulfil the wish of UN Secretary-General Ban Ki-moon for a responsible global economic policy. The banks must stop behaving like children who have never tried falling down and do not know that they can hurt themselves.
Madam President, I do not share the views of my colleagues who blame the Commission for their non-delivery. I think the biggest mistake the European Commission could have made would have been to think that more regulation is always the right answer. All proposals from the Commission should be proportionate, balanced and well-targeted.
I have been moderately content with how this Commission has responded until now, and I remain confident that the Commission has all the right tools to improve the regulatory framework for financial services. Improvements should be based, in the first place, on existing legislation and legal bases. In the second place, soft-law measures should be considered, and finally, if there is no improvement otherwise, then we should turn to legal, new regulations.
I think that sometimes there is a tendency to forget how much we have already done in Europe. Since 2000 we have gone through a serious overhaul of our financial services laws, and we have updated many of the relevant regulations already. We have a modern and sophisticated legal framework in Europe. I think it is followed by most of the people in America already, so I do not think we need to radically change our approach.
Finally, I would like to say that it of course needs to be considered that the supervisory framework is not as good as it could be. We should develop - based on the ECOFIN road map - the way the supervisors work in Europe, but also we should remember the global scale of things. We should remember that the financial industry is probably the most global industry in today's world, and we cannot act in a vacuum. We should remember that we are living together with the outside world, and we should try to develop standards, mutual recognition and convergence with transatlantic players - because that is the way to currently open competition - and also very good rules on the protection of retail clients and the way these things go forward.
Finally, one thing about the ECB. I think we need to thank the ECB. The ECB did a very good job. The consequences to the European economy, both in the financial economy and also the real economy, would have been much more severe without the very good delivery of the ECB in terms of liquidity. I think the ECB should be congratulated for that.
(FR) Madam President, Mr Jouyet - we are sorry the minister responsible cannot be here - Commissioner, the Socialists are supporters of the market, but they know that, on any market, there are honest traders and there are thieves, meaning that a police force is needed. It is astonishing to think that, when one tries to put in place a modern police force to deal with modern thieves, one is suddenly accused of archaism.
We need modern supervision and regulation. There is no danger here that we will rush into adopting ill-advised and hasty legislation of the Sarbanes-Oxley kind, as it is more than a year since the crisis began. When Mr McCreevy addressed the Committee on Economic and Monetary Affairs on 11 September 2007, he pointed the finger at the credit agencies as the chief culprits. More than a year later, we still have no proposal. I do not think this can be described as better regulation.
As for the roadmap that was drawn up in October and December 2007, I have it here and I have checked it off, point by point. Quite frankly, first of all this roadmap was perhaps not designed for the level of crisis we are experiencing today and, secondly, when I look at how the timetable has been respected, well, it is hard to know where to start on that issue.
The French President has announced a plan: he is going to condemn those responsible and gather everyone around the table for discussions. However, what is he going to discuss? Returning to the roadmap drawn up by the Financial Stability Forum and that no one can implement, because no one in Financial Stability Forum has the authority to do so?
He proposes all this, yet his initial reaction to the crisis was to rush off to London in autumn 2007 to approve Gordon Brown's strategy to set up an early warning system rather than strengthen Europe's capacity to deal with the problem, which Mr Barroso is today defending in Washington. I hope that he will be able to persuade his Commissioner, Charlie McCreevy, so that European intervention in terms of the regulation and supervision of financial markets is as vigorous as it is necessary.
(The President cut off the speaker)
(Off-microphone comment from Mr Purvis on speaking time)
I am sorry. I interrupted Mrs Kauppi and I interrupted Mrs Berès. I am generally fair, Mr Purvis.
Madam President, are only greed, euphoria and cheap money to be blamed for the whole mess? What about the flaws of the originate-and-distribute model, which has enhanced systemic risk? What about skewed pay schemes with a lack of ethics, which have stimulated reckless risk-taking? What about investment-grade values assigned to trash? What about conflicts of interest? What about banks engaging in casino-type transactions? What about the 'shadow' banking sector, with its extreme leveraging and speculation? Why have policymakers not learnt from previous crises, though stern warnings were sent? Just remember what Lamfalussy, Gramlich, Volcker and Buffett said years ago.
The argument that regulation stifles financial innovation I find ludicrous. Not all financial innovation is sound. Is a quasi-international Ponzi scheme, as it has been developing via toxic products during the past decade, to be tolerated? The issue at stake is the lack of proper regulation and supervision, and a poor understanding of financial markets, of the way they function and of systemic risk. Free markets are not synonymous with deregulated markets. Correction is going to be very painful, especially in the United States, but Europe is not immune to economic downturn. Solutions should not be patchy - consider that markets are global. International coordination is needed to restore confidence.
(The President cut off the speaker.)
(LV) I think that we can use a familiar phrase to describe the situation on the financial markets: 'the party is over, and now it is the morning after.' Somebody will pay dearly for the upset stomach, but, of course, there are some states and businesses that will profit from this extremely bad situation. In other words, there are several energy resources and particularly developed states and businesses that shifted their extra profits in that direction, and this will clearly also change the centre and balance of political influence in the world. In Europe, in my view, it is the small, new EU Member States that are the most vulnerable in this situation. Mistaken structural and taxation policies at a time of high economic growth are now creating obvious economic and social threats in most of these states, including in my own, Latvia.
The large volume of domestic private loans in euros from banks in euro area states, the large proportion of non-resident money in the banking sector and the rapid increase towards the levels of European average wages expressed in euros may lead to a revaluation of national currencies. In that case, long-term repayment to financial institutions in the euro area may become a new burden for the citizens and businesses of those Member States. If a national currency's exchange corridor is widened with respect to the euro, then inflation, which is already high, may gain ground and further postpone the entry of the new Member States into the euro area.
If the total amount of private loans in payments to the bank adds up to a two-figure percentage of GDP, then the citizens of those states will not be optimistic. This will instead create pronounced political pessimism and will impact on public opinion regarding the European Union as an institution, with all the attendant consequences for Parliament, too, in political terms in the new Member States.
Madam President, the financial crisis rages on and euro-zone countries are facing recession. The answer, we are repeatedly told, is that we need more regulation to make the financial sector work better.
But we have a problem now, and changing the rules after the problem has arisen is not going to help us with that problem.
I urge Members to consider a completely different reaction to the current economic difficulties. They are a signal that we cannot continue as we are and that, thanks to borrowing that has been too cheap and imports that have been too cheap, we have all been living above our means and we cannot go on consuming at the same rate.
Adjustment will be painful, but it is necessary, and in these hard times there is another message that is even more salient but will not be heard in these institutions. It is that the EU cannot continue with its massive legislative programmes in the name of health and safety, consumer protection, social equality, for instance, for the overriding effect of all these schemes is to add costs and to crush the productive activity on which our very prosperity depends.
In these hard times, the one message that should be heard is that European countries can no longer afford the European Union, its institutions and its immense outpourings of legislation.
(ES) Mr President, I will try to be very clear, given the wide variety of opinions expressed from my bench.
Firstly, the current crisis is not a biblical curse or a punishment from the gods. The markets have failed and these failures have prompted interventions which would have delighted Keynes himself. If the markets have failed, then we must correct what has failed in the markets; in other words, we must do something.
This something involves various things. Firstly, we must administer a shock treatment to bring the patient out of his current coma. I would remind the Commission and the Council that, while the liquidity problems can be solved by the European Central Bank, the solvency problems are something which directly affects you: the Council, the Commission and the Member States.
Secondly, to stop this happening again, we need to know what has failed in the markets and what principles we should re-establish. There has been a failure in the management of risk, in governance and, finally, in ethics.
This means that we must re-establish some basic principles: transparency in products, in companies and in markets; responsibility of managers; confidence between the financial economy and the real economy, and the central role of politics.
I agree with the Council that the times of total deregulation are over. Neither the markets nor industry can self-regulate.
The final prescription - which is needed to vaccinate the patient and ensure that this does not happen again or in any other way - is that we must continue with market integration. We have to achieve a sufficiently critical dimension, as they have done in the United States. We have to establish a democracy of the euro so that our currency can have some influence in the world in a crisis that is global. Finally, we have to review the regulatory framework and the supervisory framework which are what have failed.
I therefore do not agree with soft legislation, with codes of conduct or with self-regulation. It is up to us all to offer a response to our people who are, after all, the ones who will ultimately pay the price.
(PT) In one minute, what conclusions can I draw on the current crisis? It is the result of choosing not to adequately supervise the activities of the financial markets. Competent regulation does not kill markets but, on the contrary, is essential for their survival. There are people who are responsible for the losses, but there are now also citizens who are paying the price for their excesses and for the failures in public supervision.
Warnings were given some time ago. The Rasmussen report, which this Parliament adopted yesterday by a very large majority, makes specific proposals on the risks of excessive leverage, lack of transparency and conflicts of interest, but this report stems from work begun by the Socialist Group years before the crisis began in 2007.
The own-initiative report by Ieke van den Burg and Daniel Dăianu takes the same line. The European Union is a major partner in the international context and I congratulate Commissioner Almunia on his announcements today; but will Commissioner McCreevy agree with these? The paralysis affecting the Commission in relation to these matters has no possible justification. Parliament is doing what it should. The other institutions should also act accordingly.
Mr President, it is a pity that Mr Schulz has already left. I wanted to make the point that it is too early to say who will go bankrupt, because nobody knows who the end-investors in the toxic assets are. Maybe they are state-owned banks.
Nevertheless, I would like to encourage a broader view of events and to recall that Parliament, as early as the beginning of this year, put forward some valid proposals which were not accepted by the Council and the Commission. Firstly, we asked for economic management at EU level to be brought into line with global developments and for the broad economic guidelines to be updated. We also suggested ensuring vigorous enforcement of EU competition rules and not allowing the crowding-out of small and medium-sized business from the market, or the creation of monsters which are too big to fall. We have to promote and preserve our national, traditional business culture because the slogan of the European Union is 'in diversity we are united'.
Mr President, let us hope that the American proposals for purchases of toxic assets do work, because, if they do not, the contagion will almost certainly spread over here. I would like assurance from Mr Jouyet and Mr Almunia that we really do have our defences in place. Do we have our lenders of last resort ready to meet the very worst which might occur in such a circumstance? We are moving from a liquidity problem to a solvency problem.
It is true that, in due course, we will have to review our regulatory defences, but this cannot and should not be done precipitately, in the heat of the crisis. We would risk overreacting, imposing unnecessary, wrongly directed, over-draconian conditions which would only harm the prospects for investment in our economies and jobs for the future.
The most vital thing, which we must bring about immediately, is the restoration of confidence. Mr Almunia, you mentioned the word several times. Let us see how we can set about it.
I would urge that the leaders of the world's most important economies of America, Europe, the Middle and Far East meet together within days and assure the world unequivocally that whatever is necessary to douse the flames will be provided unequivocally wherever those flames may erupt. Only when the flames and embers are extinguished can we turn to post-mortems as to how this happened and what is needed to avoid it happening again.
Confidence is the vital base on which a vibrant financial system and a vibrant global economy rests. It is now up to the political leaders of the highest level - a summit indeed - of the free-market economies to come together - no excuses, no holding back, no arguments - to take full responsibility for restoring confidence.
(DE) Mr President, ladies and gentlemen, Treasury Secretary Henry Paulson called the past few weeks a 'humbling' time for the United States as he unveiled his rescue package of up to 700 billion dollars for the country's crippled financial sector.
The situation in the US is indeed alarming. The US financial system with its investment banks, hedge funds and structured products, which are not subject to normal banking supervision, and its numerous business operations conducted through single-purpose companies which do not appear in any balance sheet, has virtually collapsed. It is unlikely to be resurrected very quickly in its original form. The last two pure investment banks - Goldman Sachs and Morgan Stanley - have now switched to the commercial banking sector. The promise of cheap money for everyone to fuel ever more growth, profits and liquidity has been revealed as an illusion: this type of perpetual motion simply does not exist. A debt-fuelled high standard of living for everyone with a car, house and everything else early on in life simply cannot be maintained over the long term. The real economy has caught up with us: without employment, there can be no savings, without savings, there is no investment, and without investment, there is no sustainable growth.
We Europeans should learn from the US disaster. There is no alternative to budget consolidation. Money does not grow on trees. A plentiful supply of cheap money, which is what the Socialists are always demanding from the ECB, will not solve the problem; it will simply make it worse.
The Commission should implement the proposals which have the European Parliament's support as regards securitisation, maintenance of structured products on the initiators' books, more supervision, a code of conduct for market participants and various other measures as swiftly as possible, albeit with a sense of proportion and diligence.
(FR) Mr President, Mr Jouyet, Commissioner, I would like to begin by thanking Mr Jouyet for being available and for the great competence he displays in all areas.
Europe cannot go on periodically suffering the consequences of crises that are rooted in American capitalism. This has been made quite clear by previous speakers. This position is not one of hostility towards the United States. It stems from an obvious fact: the crisis is the result of serious malfunctioning which requires vigorous remedies. Self-regulation is not enough.
Today, however, the crisis is global. Mr Jouyet said earlier that we needed new measures - legislation and regulation - and to assess the balance sheets and solvency of banks, the sovereign wealth funds, salaries, transparency, supervision and accounting standards. All of this should be built upon and improved.
It has also been said many times that we need to restore confidence in the financial system, which is an integral part of economic life. I disagree with the criticism that has been voiced and believe that, in this regard, the French Presidency has been quick to react. The proposals put forward by President Sarkozy, speaking on behalf of the European Union, gave a strong signal in New York and the extended G8 meeting he has proposed will allow the world's various economic players to come together round the table, which is truly a significant step.
In order to come up with global rules, we cannot simply settle matters in Europe. Of course, there needs to be progress in Europe and, in this respect, it is unfortunate that there has been some slowness to act. However, rules also need to be adopted internationally. The economy is global, meaning that the rules must also be global.
There is a great deal of work ahead of us and I am confident that the measures Mr Jouyet announced earlier will ensure that, over the coming weeks and months, possible solutions are found. It would be foolish to think that these matters can be resolved in a few minutes.
(DE) Mr President, over the last few days, we have seen great turbulence in the US financial system, and that is putting it mildly. One of the major news items was that the company Lehman Brothers Holdings was forced to file for bankruptcy protection from creditors. I would like to make two points in this context. Firstly, the US is planning a massive support package. However, this will not end the crisis or protect us from further surprises as events continue to unfold.
Secondly, yes, it is necessary to determine which regulatory mechanisms could be improved and where more transparency could be created. Unfortunately, though, more and better regulation will not rule out all the unpleasant surprises that might occur in the financial markets in future, because we are not familiar with all the existing banking mechanisms.
Why do I say that? Let me give you an example. Surprises can arise, for example, in the netting agreements between banks, which are very important in minimising risk. Of course, banks can only take netting agreements into account in risk assessment if these agreements are enforceable in law. Could better rules in future rule out any uncertainty about the validity of netting agreements? I do not think so. In my view, therefore, even sound and reliable regulations will not rule out unpleasant surprises in future.
(PT) Mr President, the current financial crisis, which in the short term will be economic and cannot fail to be social, perhaps also political, could have been anticipated because it was predictable. It is a shame that ultraliberal dogmatism and the economy of financial speculation, the so-called 'economy of the devil', have taken the upper hand over social concerns and the economy of entrepreneurial spirit and action, which is the only economy capable of generating wealth and serving the citizens.
Regulation has failed, as Commissioner Almunia stated. It has failed and must now be radically overhauled, after being punished. The crisis in the world's financial system is structural, as Commissioner Almunia also stated. As a result, merely using the political instruments at our disposal today is not enough. The attitude of the European Central Bank, which is insisting on applying remedies that the current disease is rejecting, the blindly optimistic autism of certain members of the Ecofin Council, who just 15 days ago expressed surprised at the dimensions of the crisis, and the attitude of Commissioner McCreevy, who is proposing changing something so that everything stays the same, are unacceptable.
The Commission now has a responsibility to use all its instruments and to put pressure on the Member States to create new instruments. This responsibility particularly involves paying heed to the correct and ambitious recommendations made by the European Parliament following the Rasmussen report.
(RO) They say that you can run, but you can't hide from globalization. The same holds for global financial markets. While there was profit all around the world, there was normalcy; now that losses occur, it is the fault of capitalism. In our opinion, the blame rests to a great extent with the state which has forgotten about one of its main infrastructures, the financial one, which is just as important as roads, railways and airlines.
What the United States and the European Union, as well as Member States, are trying to do now, is to lay the foundations for a new infrastructure: the global financial infrastructure. Unfortunately, state intervention comes rather late. This is not a new regulation, but a fluidization, a supervision of global financial flows, and all the states should take part in it, thus enabling the financial system to regain credibility.
Mr President, on Monday we were told by Commissioner McCreevy that hedge funds and private equity were not the cause of the current turmoil. In today's Guardian it was reported that the billionaire John Paulson was revealed yesterday as one of the hedge fund bosses who has been short-selling UK bank shares, placing a nearly GBP 1 billion bet that their shares would fall dramatically. His New York-based Paulson & Co was last year's most successful hedge fund after it bet against the sub-prime mortgages that later turned toxic in the credit crunch. Paulson & Co has placed bets on four high street banks, including HBOS, which was forced to agree a rescue takeover by Lloyds TSB last week after a precipitous collapse in its shares.
If Commissioner McCreevy is not prepared to regulate all financial institutions, then he should be forced to step aside. The Commission has a responsibility to ensure that these institutions are not allowed to pick the pockets of pension funds, of savings and of jobs. They have to be stopped and the only way to do it is to bring transparency and regulation into this area. The so-called 'invisible hand' of the market is in fact a pickpocket and the more invisible it is, the more pockets it picks.
I think that Mr De Rossa is proposing that Commissioner McCreevy be offered a subscription to The Guardian. The President's office will look into it.
(SV) Mr President, we have every reason to react to unreasonable compensation and bonus schemes. I think that we all do that and it is entirely understandable, but I will say nevertheless, having listened to the debate, that strident political rhetoric is not the way to resolve global financial crises. Do not sound as though you are throwing the baby out with the bathwater and adding to the panic which raged on in the financial markets last week. That must not happen in this House. We must be reasonable, we must be sensible. That is the responsibility we have been given by our voters. My friends, we must take a balanced view, we must create good and effective rules and laws which allow scope for growth and self-regulation. I worry when I hear this strident rhetoric. It makes me anxious, and I fear that it will lead to an overregulated financial community which will not be able to deliver the growth we all need so much. It is growth and the prospect of creating more jobs which our voters are looking for.
(FR) Mr President, Mr President-in-Office of the Council, ladies and gentlemen, I have listened in amazement to the views of the socialists and communists, who tell us that it is the failure of the system. They obviously have a short memory, they who, in the 20th century, bankrupted every economy in their hands. The problem is global and the solution must therefore be European.
Regarding the financial question, Commissioner, I would like to know whether or not you are going to implement Article 105(6) of the Treaty establishing the European Community, under which the Council may, acting unanimously on a proposal from the Commission, confer on the European Central Bank a task relating to the prudential supervision of credit institutions. I believe that, today, citizens consider that is time for us to monitor the arrangements in place for the prudential supervision of financial systems. We cannot build an internal market without a European regulation policy.
Mr President, this crisis has demonstrated that the global financial system is seriously flawed. First the supervisory agencies failed to prevent irresponsible behaviour by investors. We have seen the development of new financial instruments that are, however, not transparent enough and do not allow for proper risk assessment. Secondly, owners and shareholders of financial institutions failed to supervise properly their own managers, who paid themselves exorbitant salaries and bonuses, and for what? For driving their companies into bankruptcy!
We need urgent action at least in these two areas. We do not want a repetition of the American meltdown scenario in Europe. We do not want in Europe a situation in which chief executive officers of financial companies go away with tens of millions of dollars while taxpayers are left to pay their bills. We expect the Commission to take serious action on this.
President-in-Office of the Council. - (FR) Mr President, I would like to thank Members for this exciting debate. We could stay here for hours, as the subject is certainly worthy of a great deal of discussion and the thoughts they have shared have been fascinating. Unfortunately, however, our time is limited.
I shall draw the following conclusions. Firstly, as regards the laissez-faire approach and the lack of regulation, bearing in mind the reserve that comes with my job, I think I have expressed myself quite clearly. It is my opinion that we must move beyond the regulation/no regulation debate. Financial deregulation is now an outdated notion. Strong, modern financial regulation will be the solution from now on. It must be adapted; we must go beyond what has been done so far.
This is the first point I wish to make and, on this, I am extremely clear. I also listened carefully to what Mrs Koch-Mehrin was saying and I repeat what she said, namely that regulation is not the enemy of the market. Everyone must face up to their responsibilities. It is the job of the public authorities to regulate and to adapt the rules in force, because the stability of the system, the protection of individual savers and the protection of depositors are at stake. I would also say to Mr Wurtz: it is also employment and growth, which have a direct impact on the real economy, that are threatened by this crisis. That is why we must act, including for the least wealthy, and quickly.
My second belief is that Europe must act within a framework of enhanced international cooperation. There is no alternative. As has been said, Europe must make its voice heard, otherwise we will be subjected to the effects of US solutions. It has already happened with Sarbanes-Oxley. We saw the consequences that had for some European companies; we saw the effect it had on accounting and market standards.
We can begin as of now. The only advantage we have is that, today, Europe can, as Mr Almunia and President Sarkozy have both stressed, assert itself firmly, make its voice heard on the international stage, take the reins and get a head start. I call on Europeans to coordinate themselves so that the Union has a strong presence on the international stage, and to reflect upon international financial structures and on international regulatory authorities.
Because if no international measures are adopted, we cannot complain about having no alternative but to draw on sovereign funds, which, moreover, we wish to keep. I am not passing judgment, but there needs to be a certain consistency in this respect. We need to know what we want to do and that if Europe fails to act, we will have to rely on other funds to stabilise the financial system.
My third belief is one that has been mentioned by several speakers, including Mr Schulz. It is true that we must address the issue of salaries and the problem of profits linked to cyclical market activities. The issue of market operators' salaries should also be seen in the context of this international reflection. I am not the first to say so. Gordon Brown has also said so in the past. It seems logical to me, and in-depth thought must be given to this issue.
It is clear that this is not just an economic and financial crisis, but also one of ethics and responsibility. It is a crisis of economic ethics and concerns all actors and political leaders, whatever their leanings. As Mr Wurtz and other speakers have stressed, finance must continue to serve the economy; the economy must not be the victim of finance.
As I have said, thought must be given to the role of financial institutions and to the roadmap concluded by the Finance Ministers on the basis of Commission proposals. Let us talk about specific progress. To Mrs Berès, I say that we must go further and, with regard to the timetable, act quickly. I repeat what Mr Almunia said: the Commission must act quickly because it is a question of restoring confidence, and I wish to conclude on this point.
Even if Europe is less affected, it is still important for us to send out messages of confidence. This means action, international cooperation, not being afraid to adapt rules, acting quickly and having proposals on the table ready for the European Council on 15 October, applying the suggestions made by Parliament and, as has been said, being aware of the fact that we are dealing with transactions that affect not only the liquidity but also the solvency of the entire financial system.
It is now economic confidence that will kickstart growth and that is why we must cast aside dogmatism to take firm action and use the full range of tools at our disposal.
Member of the Commission. - Mr President, I agree with all those who have stressed in this debate that we have to react; that we have to react to a very big transformation in our financial system; that we need to learn from the errors of the past; and that we need to work together - the European institutions - because, without our interinstitutional cooperation, we all know that we cannot succeed. We also need, in reacting, to work together with the other players in this game, and we know that we are talking about global financial systems. If they were not global, we would not be affected in the way we are, so we cannot forget that our leadership, our initiatives and our decisions should be followed by a high degree of consensus around our positions with the other partners and the other players. If not - let us be honest - we will pay the price of being clear but naive, and we will not be competitive in the financial industry, and we need to continue to be competitive - not only efficient, not only rigorous, not only able to learn the lessons of the past, but also to be competitive.
As I have already said in my introductory remarks - and I agree with the chair's remarks - what I mean by reaction in the short term is to fully implement the ECOFIN road map as soon as possible - and we are on track, Mrs Berès. The assessment carried out a few weeks ago in Nice shows that we are on track in adopting the decisions of this ECOFIN. Next week we will need to put forward proposals on the Capital Requirements Directive and, in a few weeks, to the Credit Rating Agencies Directive.
In this Parliament and in the Council, the adoption as soon as possible of the Solvency II Directive is also very important. But beyond the EU's borders the Financial Stability Forum needs to continue working very intensively; it is a very important institution at this moment - the level 3 committees of the Lamfalussy framework. We are deeply concerned - Parliament, the Commission and, I hope, also the Council - about the lack of efficiency of some reactions at this level, and these are key institutions that should work much more efficiently than when these institutions were created a few years ago - the Basel Committee, the International Accounting Standards Board - that is a key issue, as Mr Jouyet said. So, we are not alone. We have to react quickly, in an efficient way, taking into account the big problems that we are facing and, at the same time, ensuring that our leadership is followed by others - as we know is the case in many other regulatory areas.
From a structural point of view, unfortunately, we cannot decide on everything today. But it is true - and I fully agree - that the relationship between regulation and markets will change because of this crisis. It is obvious there is a regulatory failure, among things.
I think we all agree that we need to establish a more intense relationship at all levels with the US authorities, not only in our task as the Commission or the executive branches, but also Parliament with Congress, which is now a key actor in the solution of the particular problems in the USA. We need to react at the multilateral level. The real origin of all these failures in the financial systems - the excess of liquidity, the excess of risks adopted by the actors, the low risk aversion that we have seen in the past - the cupidité, in the words of Mr Jouyet - has been created by these global imbalances that the global institutions have not been able to solve so far, and we need to act, as Europeans united, to convince the other partners in the global arena that, if we are not able to adjust these global imbalances in an orderly way, they will create new problems in the future, and we need to coordinate ourselves within the EU in a more clear and efficient way.
We are living in an economic and monetary union. We have an internal market, we have an action plan for integration of financial services, but we still have a lot of internal barriers and inefficiency. I think all of us should be aware that this will require more European integration and not more national reactions or defensive attitudes from the Member States.
Beyond this, we need to keep in mind what our challenges are for the medium to long term, and we need to preserve, in this very difficult environment, the Stability and Growth Pact, the Lisbon Strategy, and the energy and climate change strategies, which are extremely important now. We cannot afford to forget that we are facing not only very difficult short-term challenges from the point of view of financial markets, but also big challenges over the medium to long term for the world economy and for our own future.
One last word: this was not in the road map but will be on the agenda of the next ECOFIN, and the Commission will fully agree with this issue. We need to think about the systems of remuneration of executives, directors and CEOs and all those who can create trends and who can adopt decisions in the markets. I will tell you one thing - and this is also addressed to the Council - in 2004 the Commission - and in particular my colleague Charlie McCreevy - put forward a recommendation asking the Member States to adopt decisions in this regard, to avoid wrong incentives. We have been considering what has happened since then, during the last four years. Only one out of the 27 Member States reacted positively to this recommendation from the Commission point of view. So the Commission fully agrees now with this consensus to touch upon these important issues as well.
The debate is closed.
Written statements (Rule 142)
in writing. - The US financial system has been jolted in the last few days as Lehman Brothers filed for bankruptcy and Merrill Lynch, fearing a similar-type collapse, agreed to be taken over by the Bank of America. The Dow Jones industrial average fell 4.4 % on 15 September, and another 4.1 % two days later. The decline in stock prices worldwide on 15-17 September resulted in about USD 3.6 trillion in losses for the investors. The stock of AIG has plunged more than 90 %, from USD 72 last year to USD 2.05. The U.S. government took control of AIG with an USD 85 billion bailout on 16 September. These 'developments' point to the largest financial crisis facing the US since the opening of the Great Depression. They have occurred a week after the US federal government seized control of Fannie Mae and Freddie Mac, the giant mortgage companies. The problem is that Lehman Brothers and AIG owe many billions to creditors not only in the United States but in Europe as well. Is Europe prepared to absorb the shock induced by its indissoluble link with the US market? Is the EUR 36.3 billion injected into the market by the ECB and Bank of England enough to make the danger disappear?
in writing. - (PL) I should like to draw the attention of the House to the following issues.
1. The US Government and the Federal Reserve have so far allocated a sum close to USD 1 trillion to combating the effects of the financial crisis. The so-called Paulson package contains additional proposals estimated to cost a further USD 700-800 billion. This suggests that the current crisis is comparable to the great crash of 1929.
2. In addition, the ECB made available around USD 750 billion to improve liquidity, whilst the Bank of England released approximately USD 80 billion. These moves provide further confirmation of just how serious the situation of Europe's financial markets is deemed to be.
3. All the measures mentioned indicate that strong and decisive government intervention is back in favour. Even the most liberal economists recognise the need to introduce rules to stem the crisis, and are actually prepared to accept the involvement of governments and international financial institutions in these processes.
4. The scale and extent of this crisis will impact negatively on the course of transactions in the real economy. This will result in recession in the US economy, which means negative economic growth. It will also mean a slowdown of economic growth in Europe.
5. In view of this situation, it is imperative for all countries to strengthen institutions providing financial supervision. This is particularly true of the EU. These institutions need to be able to exercise stronger supervision of the activities of the major banks, investment funds and insurance bodies. Stronger supervision is the only way to improve financial security and ensure financial stability in the future.
(FI) Now we know that the state is needed as a guarantor of capitalism financially and not just militarily. The Government in the United States of America, that fatherland of predatory capitalism, has privatised the profits from speculation and is now socialising the biggest losses to the trash bank through speculation in the history of its economy.
Raubtier (predator) is the German name for that type of capitalism that is based on another word Raubgier (rapacity), which is close to Raub (robbery). Both are better.
Savers who have prepared for rainy days everywhere in the world will be robbed of the value of some of their savings in the years to come when, as a result of the events of last week, the world economy is inflated and/or we go into economic decline. It is hard to imagine how the United States could otherwise pay the enormous debts it is only now incurring and how, in a time of inflation, the weakening of the value of money, it will respond to its own worsening ability to pay off its debts and normalise its overpriced assets.
The time bombs permitted by the American Government and made by the market terrorist banks of predator capitalism there, based as they are on swap deals, the virtual packaging of financial products, the insolvency of customers who are not creditworthy, and bogus loan insurance policies, have exploded in the face of the taxpayers; and the rest of the world is paying the price.


9. 2007 discharge: FRONTEX (


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