Banking lobby scores first major partial victory

If things had gone according to the European timetable, the Economics and Finance Ministers of the European Union would have had to decide last weekend, how large the contribution of the banks to the costs of the current crisis should be, which they almost triggered singlehandedly. After all, the Member States and the European Central Bank (ECB) generously showered the banks with bailout money at the expense of the taxpayer. At the end of 2009, the European Commission had approved staggering EUR 3.4 billion in aid for the financial sector, and at providing more than 600 billion, the ECB also proved to be more than generous. However, in spite of record profits and new record bonuses expected to be paid, the banks do not want to know of repaying the damage they have caused. Instead, they have put an army of well-paid lobbyists onto politicians to nip any regulation approach in the bud. Successfully.

Lopatka: Nobody talks about the Financial Transaction Tax any more

First, the introduction of a Financial Transaction Tax (FTT), which was also demanded by the Austrian Government, was buried. The FTT, which first and foremost would have affected hedge funds and investment banks, whose speculations could fuel the danger of a new core meltdown in the financial system, was at the height of the crisis verbally endorsed by a number of Member States, among them Germany, France and Great Britain. Civil society organisations and labour representatives such as the Austrian Federal Chamber of Labour (AK) and the Austrian Trade Union Federation (ÖGB) vehemently supported its introduction, as it would not only have generated substantial revenue but also a mild dampening of the speculation craze. For that reason, it is Enemy Number One of the speculation industry, which has mobilised its cohorts in order to - originating from the USA - use propaganda and undisguised threats to make one country after the other reject this tax. Characteristic for the success of the lobby machine was the résumé of the Austrian Reinhold Lopatka, State Secretary at the Austrian Federal Ministry of Finance, after the informal ECOFIN in Madrid. Apart from France, said Lopatka, no other Member State participating in the meeting had mentioned the FTT. It is therefore clinically dead.

Germany: National interest put before Europe

Particularly remarkable is the role Germany plays in this. If there was still political consensus under the grand coalition, that the FTT was necessary, the current coalition of Christian Democrats and FDP - under the pressure of the lobby work of Ackermann and Co. - has initiated a dramatic change of course. If the current German government has its way, the banks will not at all be held responsible for the costs of the current crisis. The EUR 500 billion taxpayer's money spent to rescue the banks from collapsing has been virtually forgotten. Instead, the German government promotes another idea: the so-called bank levy. The suggestion as first glance is that the banks are supposed to pay for the crisis after all. In actual fact, however, this kind of bank levy is an insurance premium for crises that will happen in the future. The idea is that all institutes pay an annual amount into an insurance fund. If a new crisis arises, the costs it will incur will be paid from this fund. However, the amount, which the banks put into this pot, will by no means be enough to finance a crisis similar to the current one. In the end, it will be once again the taxpayer who shoulders the burden. A very bank friendly model, which the German government massively promoted with its European partners.

Even pseudo bank levy cannot get majority

Anybody, however, who thought that the Member States had no other choice but at least to adopt this cut-rate variant of a pseudo bank levy, was corrected by ECOFIN. A comment of ECB president Trichet was all that was needed. Trichet warned not to overburden the banks. It would be better to wait and see what the ongoing discussions about new capital regulations for banks would bring. Only then, it would be possible to judge whether the banks were in a position to cope with a levy. This comment by Trichet was enough to also postpone the issue of an EU bank levy indefinitely. The unspoken – and by no means unjustified – hope of the financial lobbyists and their helpers is that the people will soon have forgotten the subject. This is the attitude, the EU will have adopted when it enters the decisive negotiations with the other G20 partners.

Economic policy: everybody in his or her own allotment

There is also little news concerning the issue of economic cooperation within the EU. Following the fact that the Greece debt crisis has proven that the longtime criticism of AK and ÖGB has been justified, according to which a single currency in Europe without economic coordination would lead to dangerous imbalances, the Finish EU Economic Affairs Olli Rehn has suggested that the Member States would discuss and rubber-stamp their respective national budgets already prior to their votes in the national parliaments – including veto option. Here too the Finn soon had to recognise the power political boundaries of the European Commission and European cooperation. The Member States in Madrid made no secret of their opinion that his proposal was “too extreme”. “Member States are complex and national budgets are also complex”, said the Spanish President-in-Office of the Council, Elena Salgado.  Nevertheless, the 16 members of the Euro Group agreed to exchange information about the competitiveness of their countries in future. Starting with the next session, the competitiveness of two countries, hosted by a third, will be discussed by all within the Euro Group. Spain and Finland will be the first, followed by Portugal and Luxembourg.