November 10, 2008
The G 20 talks take place in Washington on 15 November. The EU extraordinary summit agreed on 7 November a set of principles that should guide future talks on the reform of the global financial architecture. President Sarkozy stated afterwards that the world will have to get used to it that the EU now speaks with one voice. Does it? That Europe was able to take the lead in the global financial crisis was an agreeable surprise.
Reports of the summit indicate that there were some tough negotiations before agreement was reached – hardly surprising, considering what is at stake. However, speaking with one voice does not imply consensus between 27 Member States on all points. It does, however, substantially increase Europe’s influence – highly desirable as the US Administration changes.
There is agreement on the need for more regulation, with credit rating agencies and hedge funds in the front line. Revised accounting standards, an early warning system to tackle risks, a central role for the IMF and an overhaul pay policy for company executives are all addressed. The EU leaders also endorsed a statement that within 100 days of the G-20 talks in Washington, measures to implement the principles desired by Europe should be drawn up.
France is pushing for a coordinated economic strategy and thus economic governance. There are serious differences of opinion as to what this means. Sarkozy has made clear that he does no mean “a federal Europe”. But he has reiterated that he is unhappy with the role of the European Central Bank,whose independence Germany regards as sacrosanct.
Although there is agreement between France and the UK on the need for more regulation, there are serious differences in their attitudes towards regulation, which will show up in the drafting process.
Unusually, the European initiative is French-driven, with broad British support but a reluctant Germany. A reactive role is unsatisfactory for Europe’s economic motor. Joschka Fischer rightly argues that Germany should stop opposing the very principle of economic governance and lead the way in fashioning it. “The EU needs an economic government for the deep and long crisis ahead. Germany, Europe’s biggest and most important economy, should lead the way decisively”.
There is an urgent need for macroeconomic and fiscal coordination at the EU level. The EU must be able to respond politically. “Simply put, Europe’s nation states are too small to address a crisis of this dimension on their own. Only the EU can protect the interests of all Europeans – including those outside the euro zone and even outside the EU. But, while Europeans have created strong institutions with the euro and the ECB, they still lack an adequate political superstructure to confront the coming economic crisis.”
Many believe that the overall exercise will lead to a more inter-governmentalist approach in Europe. It is to be hoped that the overall debate will be constructive and not be used to further spurious arguments on inter-governmentalism and the “Community method”. The work involves mixed competences, with the Commission coordinating but not necessarily legislating.
The role of the incoming US Presidency at the Washington meeting of 15 November remains unclear. Obama recognizes the need for further regulation, but his views on how far this legislation should go will be closer to those of Gordon Brown and Nicolas Sarkozy. He has also indicated, in relation to his economic stimulus package, that he is inclined to introduce at an early stage a ‘big bang’ social and economic reform package.
Let’s hope that Europe will continue to play its newly found leadership role and that Angela Merkel will act decisively alongside Sarkozy and Brown.Author : Stanley Crossick