European Voice, 14. Februar 2008
"Europe has to develop own positions to global challenges."
At the moment we see a fast sequence of crises in financial markets. Some managers call these market corrections, suggesting that they might be a necessary inconvenience from time to time and advise against quick political action. This is surprising. A natural market correction would not need taxpayers’ money to avoid larger turbulences and their impacts on the real economy. In the cases of the current crisis we see consequences of irresponsible acting of some managers. Public authorities have to serve as lenders of the last resort to stabilize the "autonomous" market.
At the moment an US-induced crisis affects Europe. But fortunately and thanks to the building of the Single European Market the national markets in the EU are not so dependent on the US as they were 10 years ago and therefore are more stable in crises like these. In the coming years this will continue, while similar developments in Asia go on. This will help to shield the international system from quick global crises and their direct effects.
Europe has contributed to the stabilization of the global financial system by successfully implementing the Financial Service Action Plan from 1999. The discussion and coordination between the member states was necessary to achieve that. This gave Europe an important experience in managing a common market and preserving the members’ individual market structure. Europe should use this experience and insert this perception into the international debate. In this way Europe can help to design the international economic development.
Europe also has to learn its lesson from the current crises and cope with recognisable shortfalls. Do the supervisory authorities exchangeenough necessary information? Could a possible squeeze of a European major bank be handled fast and effectively? Do we need a European lender of the last resort?
These questions should not be answered with too much overhaste and regulation is not always the best and only solution. Other mechanisms (like codes of conduct or indirect control by counterparts) might emerge as more utilisable and effective methods. But to find them discussion is sometimes necessary. We agree that measures have to be thought-out and evaluated in their consequences. But the inactivity we see at the moment from ECOFIN and European Commission is not a good example for well considered action.
Rating Agencies and Hedge Funds may be an example. The European Parliament requested already with the Katiforis-report in early 2004 to examine the role of credit-rating-agencies. As they are blamed for reacting too late on the dry out of the sub-prime credits, the US-President's Working Group, public prosecutors, the SEC are now examining them in the US and the European Commission is also considering measures. The same is true of Hedge Funds: The European Parliament asks for an ex ante scrutiny of their risks but it seems that as long as we do not have a serious crisis and US-activities, the EU Commission won't work on this issue.
Financial markets and the system of norms that control them are the backbone of our economy and therefore we need to find an alternative to the US-model. At the moment we are more copying US- guidelines. An further example for this is the convergence of IFRS- and US-GAAP-accounting standards: The US - although they don't apply IFRS themselves - have a major influence on these standards. First, through overrepresentation on the IAS-Board, second as the IAS-Board is formally bargaining with the SEC on the convergence of finished IFRS-Standards to the US-GAAP and thirdly by interpreting it through the SEC. Europe has assigned in this process to influence these processes and relies on a benevolent standard-setting body.
This is not the right approach to feed Europe's rich experience into a common economic framework. We better start right now to change this: The first opportunity to make use of Europe's versatile and stabile structure and going new paths is the building of a new cooperation in financial market oversight: Europe can create a unique financial system that combines both strengths we have so far: subsidiary authorities that know their oversight subjects very well and effective monitoring of cross-boarder affiliated groups.