Local view for "http://purl.org/linkedpolitics/eu/plenary/2009-09-16-Speech-3-010"
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"Mr President, Mrs Malmström, ladies and gentlemen, this is my first time before the House in this new legislative term. I want to start by congratulating all of you on your election, or re-election in many cases. I am sure that we all share a sense of responsibility with regard to tackling one of the greatest political challenges of our generation: how to overcome this deep economic and financial crisis. We have to restore confidence and stability for our citizens, while increasing their opportunities and ensuring the highest possible level of social cohesion for everyone.
Based on the most recent information available, these discretionary fiscal stimuli, together with the action of the automatic stabilisers, which are very important in the European countries due to the weight of our taxes and social welfare system, are predicted to add, as a contribution to total demand, the equivalent of 5.5% of EU GDP between 2009 and 2010.
The new US administration has also adopted a very significant stimulus plan. Given that its automatic stabilisers are not as extensive as ours in Europe, the total sum of direct stimuli plus automatic stabilisers means that similar support is being given on both sides of the Atlantic. In addition, countries such as Japan, China, Canada and other G20 members have also adopted equivalent fiscal stimuli.
The London Summit at the beginning of April insisted, in this respect, on the need to quickly put these plans into practice. It called for close monitoring of these plans and said that, if necessary, they should be supplemented by additional measures. We can now confirm that these stimulus plans, together with the very significant monetary stimuli adopted by the central banks, plus the mobilisation of public resources in support of financial institutions, particularly the banks, have managed to halt the economy’s freefall. They are also now allowing us to see, this autumn, the first signs of stabilisation, as is apparent from the economic forecasts that I had the opportunity to present two days ago in Brussels. For the first time in two years, these forecasts have not revised the previous forecast downwards.
However, we are not yet able to say that economic activity could sustain itself if these stimuli were removed. It is also true that, even with the stimuli that are being applied, there are risks of a relapse given the extremely worrying rise in unemployment and the as-yet unresolved weaknesses in the financial system.
As a result, one of the messages that the G20 Finance Ministers agreed on with regard to the Pittsburgh Summit, when they met in London at the beginning of this month, was the need, for the time being, to maintain the temporary support measures, without ignoring the need to start developing a coordinated exit strategy. I will come back to this briefly at the end of my speech.
The first two G20 summits in Washington and London were also decisive in terms of setting a global agenda for reforms in the systems of financial regulation and supervision. It may be said that we are witnessing a radical change in tone after nearly three decades dominated by the model of deregulation and theories on the alleged infallibility of the financial markets.
In Washington, the G20 countries established the foundations, laid down the principles and defined the agenda for subjecting the financial markets to stricter and more effective regulation and supervision, leaving no areas, products or financial players outside the control of the regulatory and supervisory authorities. These authorities must cooperate and coordinate their actions with one another much more closely in order to rectify the evident ineffectiveness of national supervisory systems vis-à-vis globalised markets and financial institutions operating across borders in these markets.
Extensive work was carried out at the London Summit in April to bring about concrete and significant progress in the implementation of this reform agenda. From prudential accounting rules, applicable to financial institutions, to the firm requirement for transparency in non-cooperative jurisdictions, namely tax havens, and including the regulation of hedge funds or other financial institutions, the organisation of transparent derivative markets, and the adoption of rules on the pay of senior executives of financial institutions and traders operating on the markets, the London G20 Summit took definitive steps towards fulfilling the promise of reform.
As a result, the European Union has performed a very important task not only in promoting these agreements at G20 level, but also in applying these G20 agreements. This has involved intensive regulatory work over the last year. Some of these proposals have already been adopted here in this Parliament and by the Council. Others are currently being discussed in this House and by the Council and, by the end of the year, the Commission plans to adopt another series of proposals, starting next week, one day before the Pittsburgh Summit, with the proposal to create the European Systemic Risk Board and three European micro-supervisory authorities, based on the recommendations of the de Larosière report, which both the Council and the Commission have taken on board.
The US administration has also revealed an ambitious financial reform plan, which President Obama confirmed this week as a priority of his term of office. He has recognised the responsibility of the United States as being the place where this crisis was born and developed.
The issue that will be on the table at the G20 Summit in Pittsburgh next week is at the heart of this challenge and this concern. I am convinced that this issue will keep coming up throughout the next period and throughout this Parliament’s legislative term, regardless of whether these issues are discussed at G20 summits or European Councils, in your own debates or in the proposed initiatives that the next Commission will bring before this House.
The objectives set for the Pittsburgh Summit include checking on the positive progress of these reforms and ensuring the necessary regulatory convergence on both sides of the Atlantic. Any regulatory divergence will or could be used in the future by investors for arbitration strategies, which could once again create major distortions in the markets. However, in addition to ensuring compliance with what has already been agreed and encouraging the implementation of the measures adopted, the Pittsburgh Summit must send out a clear political message. The absolute desire of governments, political leaders, institutions, our own countries and the European Union to establish a solid regulatory framework with a firm commitment and dissuasive message must now be made clear. This message must say that ‘no one should think that, having got over the worst part of this crisis, those former practices which led to the crisis can be allowed to redevelop, as if nothing had happened’.
The public expect guarantees that the financial institutions and their executives will be required to comply with rules, particularly on pay, which will prevent them from once again endangering the financial system and the real economy as a whole. It must be said that the European Union is totally united on this point.
Another issue that has been high up on the agenda of the various G20 summits is the reform of the international financial institutions, as already mentioned by Mrs Malmström.
The only point I wish to add is that an extremely important step forward was taken in London in terms of the financial capacity of these institutions, particularly the International Monetary Fund (IMF). Its lending capacity has been increased by no less than USD 500 billion, as a result of which the total funds now available to the IMF for its operations are USD 750 billion. In addition to that, it was agreed to distribute between all the IMF’s member countries, in proportion to their quota, special drawing rights amounting to USD 250 billion. On top of that, it was also agreed to increase the IMF’s financial capacity in order to boost its concessionary loans to the poorest countries. All that is already in hand. A great deal more progress has been made in the space of six months than over many years before that.
As a result, the European Union has, of course, agreed to duly contribute to this increase in the IMF’s funds. The Member States of the European Union have agreed to add EUR 125 billion to their usual contributions, in proportion to the financing of the new objectives.
The G20 leaders will also discuss changing the representation of the various countries on the governing bodies of the international financial institutions. Emerging and developing countries quite rightly aspire to a more appropriate representation. This is an aspiration that the European Union supports, but it must be translated into concrete agreements. That is why the European Commission – although this is not the official position of the Presidency of the European Union – continues to say that, in line with what this Parliament has thought to date, the best representation for the European Union on these bodies is a single representation.
The Pittsburgh Summit agenda will also cover other issues: financing of climate change, in preparation for the Copenhagen Summit; the need to resume international trade negotiations and not to give in to protectionist tendencies; and increased support for the weakest and most vulnerable countries in tackling this crisis. As you know, the Commission adopted a communication on the financing of climate change last week.
Finally, please allow me to conclude by mentioning the wish expressed at the last meeting of the G20 Finance Ministers, and which will be discussed at the Pittsburgh Summit: the need to establish the foundations of a future model of more balanced and sustainable growth. This will firstly involve developing exit strategies, not to be applied immediately, but to be applied when appropriate and in a coordinated manner. This is because the development of such strategies is not only key to a sustainable exit from this crisis, but also to offering, at the same time, a prospect of medium-to-long-term sustainability following the profound effect that the crisis has had on public finances, on levels of employment and on the capacity for growth of our economies.
The G20 Summit in Pittsburgh is the third to be convened at the level of Heads of State or Government since the collapse, one year and one day ago, of Lehman Brothers and the start of a crisis of proportions not seen for many decades.
In light of the first two top-level G20 meetings in Washington last November and in London in April of this year, it is clear that the G20 is playing a decisive role in coordinating the global response to this crisis.
The G20’s contribution to the development of a coordinated response has been vital in avoiding an even deeper recession than the one we are currently experiencing. It has also been vital in establishing the foundations of an economic and financial system that will, in the future, prevent a repeat of the imbalances and excesses that have led us to the current situation.
The European Union has played an active and decisive role in encouraging the G20 in this respect. As recalled yesterday in this House by President Barroso, the first summit in Washington was a European initiative by the French Presidency and President Sarkozy, together with the Commission. The European Union also made a decisive contribution in terms of setting ambitious objectives for the two previous summits and actively participating in the preparatory work for these summits, in order to achieve not only declarations of principle, but also concrete results and commitments.
All Europeans, as well as the European institutions, should feel satisfied about all this. We can also be reasonably satisfied about the level of coordination that has existed between the various European representatives on the G20: the European countries that are G20 members and participate in the G20 meetings as such, plus the Presidency of the European Union together with the Commission, the latter representing the voice of all Europeans and the common position of all Member States.
The Washington Summit last November allowed the world’s main economies – the G20 countries account for around 90% of world GDP – to agree on the implementation of stimulus plans to support economic activity at that time, last autumn, when credit, international trade and investment came to a sudden halt as a result of the tremendous financial shock, which first occurred in August 2007 and which then gained incredible momentum in September 2008.
A few days after the Washington Summit last year, the Commission proposed the European Economic Recovery Plan, which received the political support of the European Council in December. This plan has formed the basis of the European response in terms of fiscal policies and policies to stimulate demand through instruments which are in the hands of national governments and parliaments, or which are in the hands of the European institutions themselves."@en1
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