The EJC and the EU Commission’s Directorate-General on Economic and Financial affairs (ECFIN) on October 18th and 19th gave 17 journalists from radio, print and TV representing 12 Eurozone countries the chance to experience Brussels at its busiest, right in the middle of the Summit of the European Council of Ministers. The agenda reflected what was being discussed by the European heads of state across the street; banking and fiscal union for the EU and how to save the Euro. The guest journalists were also given full accreditation to the Council summit.
First on the agenda on Thursday morning were three guests, Declan Costello, the director for ECFIN, German economics professor from the University of Duisburg, Ansgar Belke and European MEP Jürgen Klute. The seminar was moderated by Zoltan Geyvai from the EJC.
Mr. Costello introduced the details of the Commission’s plan for economic governance and fiscal capacity, which addresses fundamental elements of the European Crisis. Top on the list was breaking the link between banks and sovereign debt of nations. New legislation would increase the Commission’s reach in monitoring the internal fiscal conditions of member states by embedding international law into national institutions. This would be enforced by graduated sanctions for offending member states. In the end, controversy stems from a considerable loss of sovereignty for member states.
Mr. Belke took the floor next talking about the crisis from a German perspective, preferring market flexibility to fiscal transfers to southern Europe. The issue is that there is no investment from the markets in these countries and that capital flowing in from other Eurozone countries is creating an artificial balance of payment. The short crisis of market confidence is being solved by the ECB but in the long run there is still the problem of the reluctance of larger economies to finance the others through fiscal transfers.
Next Mr. Klute spoke about how it was funny to speak about reinforcing economic governance when it was only 10 months ago that it began and that there needed to be more time to see the effects. He also spoke about the imbalance in the EU where Germany can ignore the mandate of the Commission while Greece or Portugal cannot. The “gap” as he put it is a huge problem and must be addressed as a change to internal policy. According to Klute the Commission is only trying to encourage Germany to unlock its full growth potential.
The next speaker to take the podium was Rolph Strauch from the director’s board at the European Stability Mechanism, the newest addition to the European Union’s financial stability arsenal. Strauch made it clear that the ESM is a crisis resolution procedure. The point of ESM was to give an instant resolution and provide time for an intermediary adjustment process when a country cannot finance itself in the market. The legislative framework is hopefully to be completed by the end of the year and implemented in February.
The ESM has been a hot point in the news since it was allowed to be implemented a few weeks ago. The guest journalists peppered Mr. Strauch with questions, which were to be kept strictly off the record and must remain so here. The tone of the questioning was how much money has already been paid into the ESM, the legality of the ESM and if the mechanism was ready to tackle the Spanish crisis.
Lunch was next on the agenda and the EJC welcomed Simon O’Connor, press spokesman for Olli Rehn, the EU Commissioner of economic and monetary affairs and perhaps the most sought after spokesperson in Brussels. Amidst the rustic charm of restaurant L’Altier, the guest journalists had O’Connor’s direct and intimate attention for a solid hour while a three course meal was served. The conversation was kept strictly off the record, which allowed O’Connor to speak more freely on issues such as the Commission’s hopes for the upcoming Council Summit and the economic policy pertaining to the journalist’s home countries.
Before the journalists prepared to cover the events in the council there was one more speaker, Hans Martins, the chief executive of the renowned Brussels think-tank, the European Policy Centre. Martins provided an interesting perspective on the Euro as being a strong currency, but being used by nations that were experiencing a growth crisis. His advice was to work and not save your way out of the crisis. He noted that the USA had a huge debt problem and in comparison the EU doesn’t owe the world money. Martins recommendation was that the EU, “fire the growth bazooka.”
The rest of the afternoon was spent covering the Council summit where leaders made their respective agreements on agenda’s but as expected, nothing earth shaking was agreed upon. It was predicted that the real show would be the next meeting in December, when what was agreed would have to be set in stone.
In the morning before the next council session, the topic was also a very new proposal, which had been the main topic for the European leaders at the Council, the Single Supervisory Mechanism (SSM) for consolidating European banking. The EJC moderator expressed doubts that the policy, which was agreed upon during the summit, would be able to go through before the end of the year. The guests were a perfect mix to give a balanced view of the policy in question. Charlotte Sickermann from DG MARKT who worked directly with creating the policy, Arjun Singh-Muchelle, who is the head of EU affairs for the British Banking Association and Karel Lannoo, who is the Chief Executive at the Centre for European Policy Studies, a well-known Brussels think-tank.
Ms. Sickermann spoke about the SSM in terms of stabilizing the Eurozone by breaking the connection between sovereign debt and banks by introducing EU level supervision of banking practices essentially creating a single block within the 17 Eurozone area banking systems. This would again help break the connection between banks and national debt and prevent bank runs. The council’s commitment to the SSM was seen as essential or else the markets would have reacted adversely. The SSM was explained as a system between national institutions. Smaller banks would still be covered by national institutions with the ECB providing a supervisory role for larger banks. Sickermann announced that the SSM should be put into effect by 2014, a date that was met with skepticism.
The next speaker, Arjun Singh-Muchelle, from the British Banking Association, which represents banks from around the world based in London, tried to shake off the perception that London is Eurosceptic. He emphasized that London supports any proposals that bring stability to the Eurozone and preserve the single market. He stated that London could provide a platform for banks only because of the single market. The question he raised was whether or not the ECB and the SSB had the institutional capacity to have competence over 6,000 banks.
Providing a tone of expert scepticism to the whole topic was Karel Lannoo. He stated clearly that the SSM was wholly incomplete with only a supervisory mechanism. The real issue was providing deposit and liquidity, in other words to back up the normative policy with real money. The next issue with a single banking structure according to Lannoo is the complicated coordination between national bodies and the ECB. What will happen in Germany when the Landesbanks say no as always to shared deposit guarantees in the Eurozone? According to him the adoption of the SSM is fundamentally flawed when these liquidity and deposit guarantees still exist under national control and there is still fragmentation.
After the very interesting and informative morning seminar the Journalists armed with fresh expertise, on top of their already thorough knowledge of financial affairs, proudly wore their EU Council press badges and headed for the leaders of Europe.