Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum
Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum
confidence and world trade, to which Germany as the world’s leading exporter, has been particularly exposed. The European Union emerged ill prepared and poorly equipped with the necessary policy instruments to tackle the crisis. Few experts had predicted what could go wrong. In fairness, some had foreseen a looming problem in that financial market integration in Europe had proceeded apace without an adequate parallel development in the effectiveness of financial regulation at EU level. But, even had better cross border supervision been in place, there is legitimate doubt how far it would have mitigated the scale of the crisis. The problem for supervision may have been an inability to understand the nature of systemic risk as much as a failing of normal regulatory processes. And when the problem became one of bank solvency the absence of any European fiscal authority with the power to tax meant that member states had to take responsibility for bank rescues and recapitalisation. The essential role of the nation-state as a pragmatic necessity was confirmed – and not just in eurosceptic eyes. However, some decisive actions were taken in common. In addition to the adoption by the October 2008 European Council of a broadly pitched, common framework for national bank rescues, there was a recognition that the sudden demand shock created by the crisis could only be countered by government fiscal stimuli, and that it would be far more effective if member states acted in harmony. The Commission produced a fiscal stimulus plan – implementation of which has been both imperfect and uneven – but nevertheless counts as a significant new move in economic policy coordination. These are important positives. The crisis revealed however that lack of adequate policy coordination remains an area of serious weakness for the EU. First, there can be no sustainable economic recovery without a cohesive EU approach to banking sector recapitalisation, regulation and supervision. In many respects, what is required at EU level is a Treuhand agency, which famously privatized many East German enterprises during the process of the country’s reunification, to overcome the innate problems of its banking sector. But there remains a latent risk that certain member states are unwilling to address this weakness and use as an excuse, the assertion that this is still an Anglo-American rather than a European crisis. Second, several member states in central and eastern Europe have run into such severe economic difficulties that they have had to resort to the IMF for balance of payments support. While (following the April 2009 G20 meeting in London) better placed EU member states have contributed the 18 After the crisis: A new socio-economic settlement for the EU
increased resources to the IMF that made these interventions possible, it is striking that the leading nations of the EU have preferred to rely on the mechanisms of the IMF for this purpose rather than use the shared processes and institutions of the EU. Third, the wider pattern of responses to the crisis have largely been national, with the consequences for the EU’s established policy frameworks treated as second order issues. Governments have sought both properly and legitimately to protect their citizens against the impact of the crisis: the unprecedented risks of loss of savings due to potential bank collapse; more mortgage defaults and housing repossessions; and business bankruptcies. Emergency measures have been taken to mitigate the impact of the crisis on particularly vulnerable sectors, for example the motor industry, where orders collapsed as new car purchases were deferred. Emergency actions taken at national level inevitably lead to distortions in the Single Market. The scale of these will remain relatively uncertain until the crisis has completed its trajectory. But we know already that in banking and motor manufacturing, the provision of new state aids has been extensive. Fourth, several instances of a nationalistic “my-citizens-first” approach have been particularly troubling: n In the first few months of the crisis, there was the call by the President of France (although the French government later backtracked) that French firms receiving public aid should repatriate investment from new member states. n Banks in receipt of national aid have been pressurised to concentrate their lending on domestic customers and cut back on overseas lending, even within other EU member states though. This poses considerable problems for new member states when their banking system is largely in foreign ownership and these banks withdraw funds and concentrate on their respective domestic markets. What makes it worse is that the scale of foreign ownership of banks in new member states was actively encouraged by the Commission in times past and rightly in keeping with Single Market principles. n The free movement of labour has become a focus of increased resentment about foreigners stealing “our jobs”: the rising tide of cries for “British jobs for British workers” is not just confined to the UK. In the process of his re-appointment President Barroso conceded the case for a review of the Posted Workers’ Directive Chapter 1 – Roger Liddle 19
- Page 1 and 2: Authors Iain Begg | Gabriel Glöckl
- Page 4 and 5: Published in 2009 by Policy Network
- Page 6 and 7: 4 After the crisis: A new socio-eco
- Page 8 and 9: 6 After the crisis: A new socio-eco
- Page 10 and 11: Simona Milio is associate director
- Page 12 and 13: Chapter 10 Simona Milio ...........
- Page 14 and 15: Before the crash: the EU as a parti
- Page 16 and 17: liberalisation. The City of London
- Page 18 and 19: of the Financial Services Action Pl
- Page 22 and 23: following the ECJ’s controversial
- Page 24 and 25: signals are in place to promote a n
- Page 26 and 27: need to be constructed to create ac
- Page 28 and 29: or indeed re-impose, what they rega
- Page 30 and 31: Markets with rules The overall conc
- Page 32 and 33: 30 After the crisis: A new socio-ec
- Page 34 and 35: Target financial stability The EMU
- Page 36 and 37: Belgium, the Netherlands and Luxemb
- Page 38 and 39: mortgage banks and the insurance se
- Page 40 and 41: financial market rules. The ESFS au
- Page 42 and 43: prudential regulation - though only
- Page 44 and 45: initiatives vis-à-vis ratings agen
- Page 46 and 47: 44 After the crisis: A new socio-ec
- Page 48 and 49: Even if membership in a monetary un
- Page 50 and 51: emained relatively contained to spe
- Page 52 and 53: The second channel of functional sp
- Page 54 and 55: But even so, the depth and intensit
- Page 56 and 57: governance in the EU and the euro a
- Page 58 and 59: in the EU show, authorities at the
- Page 60 and 61: factors will remain prevalent and b
- Page 62 and 63: centralised decision-maker. Similar
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- Page 66 and 67: (GNI), the interests of the member
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increased resources to the IMF that made these interventions possible,<br />
it is striking that the leading nations of the EU have preferred to rely on<br />
the mechanisms of the IMF for this purpose rather than use the shared<br />
processes and institutions of the EU.<br />
Third, the wider pattern of responses to the crisis have largely been national,<br />
with the consequences for the EU’s established policy frameworks treated<br />
as second order issues. Governments have sought both properly and<br />
legitimately to protect their citizens against the impact of the crisis: the<br />
unprecedented risks of loss of savings due to potential bank collapse; more<br />
mortgage defaults and housing repossessions; and business bankruptcies.<br />
Emergency measures have been taken to mitigate the impact of the crisis<br />
on particularly vulnerable sectors, for example the motor industry, where<br />
orders collapsed as new car purchases were deferred. Emergency actions<br />
taken at national level inevitably lead to distortions in the Single Market.<br />
<strong>The</strong> scale of these will remain relatively uncertain until the crisis has<br />
completed its trajectory. But we know already that in banking and motor<br />
manufacturing, the provision of new state aids has been extensive.<br />
Fourth, several instances of a nationalistic “my-citizens-first” approach<br />
have been particularly troubling:<br />
n In the first few months of the crisis, there was the call by the<br />
President of France (although the French government later backtracked)<br />
that French firms receiving public aid should repatriate<br />
investment from new member states.<br />
n Banks in receipt of national aid have been pressurised to concentrate<br />
their lending on domestic customers and cut back on overseas<br />
lending, even within other EU member states though. This poses<br />
considerable problems for new member states when their banking<br />
system is largely in foreign ownership and these banks withdraw<br />
funds and concentrate on their respective domestic markets. What<br />
makes it worse is that the scale of foreign ownership of banks in<br />
new member states was actively encouraged by the Commission in<br />
times past and rightly in keeping with Single Market principles.<br />
n <strong>The</strong> free movement of labour has become a focus of increased<br />
resentment about foreigners stealing “our jobs”: the rising tide of<br />
cries for “British jobs for British workers” is not just confined to<br />
the UK. In the process of his re-appointment President Barroso<br />
conceded the case for a review of the Posted Workers’ Directive<br />
Chapter 1 – Roger Liddle 19
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