The European Council met on 15 and 16 October 2008 “against a backdrop of international economic and financial crisis”; a crisis which many European states at first denied they were a part of and have now become subject to. The crisis was not about American greed, as officials belonging to the French Presidency originally claimed. It is now about the reckless governance of the financial system in European states through their assent to European Union regulations.
Whilst I welcome the European Council’s affirmation that it is “determined to take coordinated and thorough action to restore the smooth running of the financial system”, it strikes me as a dubious assurance, since its institutional structures and rigid regulations have been worryingly at fault in the recent crisis.
The confirmation that the European Council has welcomed the concerted action plan of the euro area countries and other non-eurozone Member States in conformity with the principles of that plan is concerning given that the Council has not sought to question the rationality, long-termism or taxpayer protection inherent to its plan. One thing has become certain: the vast amount of public money being spent in Europe on the financial crisis, as devised under Gordon Brown’s leadership, may turn out to be the single biggest state expenditure mistake in recent global history. The pan-European spending spree amounting to £1.17 trillion could well turn out to be the biggest historic gamble of taxpayers’ money in recent European history at least. The key European governments are paying an amount of public money which is equivalent to funding a medium-sized state. The billions being thrown into the bottomless “rescue plans”, for example, are likely to cost the British household £20,000, the French household £11758 and the German household £9913. European countries are enduring the brunt of all these consequences, despite there being no real foreseeable path through the financial crisis. The concerted action plan is no more than a set of knee-jerk centralized economic ‘panic’ reactions.
Whilst the Council is right to preserve the stability of the financial system, to support the major financial institutions, to avoid bankruptcies and to protect savers’ deposits, its methods remain questionable. Attempting to put European Union action at the centre of its method – as proven by the Luxembourg summit and emergency Paris meetings – was a failure. No democratic Member State was truly prepared to support the joint action. Now that the panic has set in, it seems any old solution will do. Nationalising Europe is not the way forward.
The European Council’s creation of a financial crisis cell is a new European Union power grab. It will mean a greater integration of financial services legislation into the Brussels system, at a time when it is obvious that financial regulation from Brussels has failed Britain. The fact that it will bring together the Presidency-in-office, the President of the Commission, the President of the ECB in conjunction with the other European central banks, the President of the Eurogroup and the governments of the Member States detracts from the democratic issue – that the European Union is seeking to raise its competences in the field of financial services governance, without any real consent or wider consultation.
In fact, that Brussels power grab seems to be admitted in the European Council conclusions, stressing “the need to strengthen the supervision of the European financial sector, particularly cross-border groups, and to implement urgently the Ecofin Council’s roadmap, with a view to improving the coordination of supervision at European level. In this context the European Council welcomes the setting up of a high‑level group by the Commission.”
A floating sentence under section 8 of the conclusions says: “The European Council supports the speeding up of work to strengthen the rules on stability, including work on the Capital Requirements Directive.” It is further proof of the European legislation that has failed Britain in the crisis. Politicians from across the political spectrum who have begun discussing the notorious ‘mark-to-market’ accounting rules used by all banks to value their assets have their basis in the EU Capital Requirements Directive implementing international financial rules.
They have been amended on the quiet in the middle of this crisis. “Having failed to address the disastrous politics of the EU bloc, it seemingly goes on to blame "golden parachutes", as if we can blame the entire banking failure on the agenda of fat cats. The EU is deceptive in its intentions here – they are seeking even more regulation, whereas what Britain needs is a return to a tradition of self-regulation. The fact that the conclusions oblige Member States to assert its bad judgements in this area and then call on the Council to report back on the decisions taken by the end of this year will be problematic for Governments and their interactions with the financial industry.
Whilst the European Council strives for its determination to take the necessary steps to “support growth and employment”, it must be simultaneously forced to admit that the EU’s own Lisbon agenda, which addressed that goal, has failed. With rising unemployment and what now appears to be large scale low-to-no growth, I would question the Council’s determination and ability to achieve this goal.
