News
BackThe European Parliament did not waste time and used its first day of the new session to debate the latest problems on the financial market, which, due to a stock market slump at the end of July, had flared up again. The President of the European Central Bank (ECB), Jean-Claude Trichet, the President of the Euro Group, Jean-Claude Juncker, the Polish Finance Minister, Jacek Rostowski, and the EU Monetary Affairs Commissioner, Olli Rehn, answered questions of MEPs of the European Parliament's Economic and Monetary Affairs Committee. The statements of the four speakers were barely encouraging.
Trichet: Situation worse than turbulences in May 2010
ECB President Trichet outlined the economic situation of the Eurozone: after a good 1st quarter showing economic growth of 1.8 %, growth was weak in the 2nd quarter at only 0.2 %. At the end of July, the financial market experienced turbulences. Interest rates for individual government bonds had risen sharply before. Trichet drew parallels to the crisis situation of May 2010, with consequences being even worse in some aspects. That is why the ECB decided at the beginning of August to continue its refinancing activities: that means each bank will be provided with full liquidity against securities. The credit volume currently amounts to around € 530 billion; 130 banks are currently using this liquidity; basically, 6,000 banks have been eligible thus far. According to Trichet, the total amount of collateral available amounts to about € 13-14 trillion; hence, said the ECB President, there was no liquidity problem. The ECB started its securities-purchase programme (for the purchase of government bonds) again in August. However, Trichet pointed out that the ECB has not bought debts directly as this is prohibited by the Treaty. The Central Bank therefore purchases securities on the secondary market with the intention to calm the situation on the currently poorly functioning financial markets. The liquidity made available is to be reabsorbed later. Trichet appealed to the Member States to observe strict budget discipline and engage in mutual monitoring.
Euro Group President Juncker: Package of measures adopted by the Council should be implemented speedily
The President of Euro Group Jean-Claude Juncker emphasized that trust had to be created and that the decisions taken by the Council concerning the European rescue package on 21st July had to be implemented swiftly. As to financial markets, Juncker said that he learned a proverb during his recent holiday in Austria: “Man soll nicht jeden Tag eine neue Sau durchs Dorf jagen” - directly translated: “One should not chase a new sow through the village each day” - which means that one should not come up with a new idea each day. A saying, which, according to Juncker, the financial sector should take to heart. The Council decision of 21st July with regard to the so-called “Six Pack” would help Greece to emerge from the crisis. The conditions, attached by Finland to the aid for Greece, were not helpful at all. Juncker was satisfied with the developments in Ireland and Portugal. Both countries have made good progress.
Little news from Economic Commissioner Rehn
Disappointing was the contribution of Economic Commissioner Rehn: structural reforms were necessary as were reforms concerning national fiscal policies; one had to make the most of the single market. Apart from that, it has now become necessary to implement the 21 July Council decisions. Asked about the Eurobonds, Rehn failed to give a clear answer. According to Rehn, Eurobonds were associated with substantially reinforced fiscal surveillance and policy coordination. Commission President Barroso will use the forthcoming speech on the state of the Union to introduce the proposals of the Commission on developing economic governance in the Eurozone.
Polish Finance Minister Jacek Rostowski sees solution in the “Six Pack”
Agreeing with Juncker and Rehn, Polish Finance Minister Rostowski also regards the Six Pack adopted on 21 July 2011 as the solution. The crisis could not be tackled without solidarity. This was a serious crisis; the slowdown in growth resulted in uncertainties on the financial market. There was hardly any scope left with regard to national budget policy; one has reached the limit, said Rostowski.
MEPs praise ECB and criticize Council and Commission
MEPs of all parties praised the action taken by the ECB. MEP Werner Langen of the European People's Party pointed out that in particular the slow implementation of the Council’s decisions had made it necessary to intervene on the financial markets. Nowadays, rumours are enough to create unrest and to provide speculators with profits of several hundreds of millions of Euros within minutes. The markets are to be decelerated and minimum retention periods for securities should be introduced. Representatives of the Social Democrats such as the MEP Liem Hoang Ngoc or the MEP Elisa Ferreira sharply criticised the Commission, which did not take any appropriate initiatives, and the Council, which merely looked for solutions at bilateral level. Apart from that, debt reduction was closely linked with growth, reminded the MEPs. The Council should stop blocking legislative proposals on short selling, bad debt insurance and similar dossiers, demanded MEP Udo Bullmann.
Sharp criticism for bilateral agreements by Sarkozy and Merkel
Other MEPs sharply criticised that the decisions are solely taken by Sarkozy and Merkel and that the EU was to plunge into recession. The liberal MEP Olle Schmidt remarked that the crisis was lacking in political leadership. The situation accordingly could lead to a tendency towards division within the Union; close cooperation was not only necessary within the EU 17, but also within the EU 27. The Green MEP Sven Giegold criticised that the 21 July Council decision only briefly calmed down the markets and that the Central Bank had to intervene and assume risks only a short time later. The ECB was the only institution currently capable of acting while at the same attracting criticism for this. The European Financial Stability Facility EFSF could only work if approved by each individual national Parliament. A genuine European economic union was thus required. Philippe Lamberts added to the statement of his party colleague and demanded to include the Financial Transaction Tax in the deliberations and maybe to introduce it in 2013/2014 already.
MEPs distance themselves from Finland’s demands concerning financial aid for Greece
The Liberal MEP Carl Haglund distances himself from his own governiment and regards the condition Finland wants to attach to granting financial aids for Greece as inappropriate. MEP Miguel Portas of the Left criticises that EU Bonds and jobs have never been mentioned. Banks should restrict themselves to financing the real economy, said the Green MEP Philippe Lamberts.
One of the next sessions of the Economics Committee could result in a debate with the French and German Finance Minister and the Council President, Van Rompuy, all of whom had been invited but did not follow the invitation of the European Parliament.
ECB President Trichet outlined the economic situation of the Eurozone: after a good 1st quarter showing economic growth of 1.8 %, growth was weak in the 2nd quarter at only 0.2 %. At the end of July, the financial market experienced turbulences. Interest rates for individual government bonds had risen sharply before. Trichet drew parallels to the crisis situation of May 2010, with consequences being even worse in some aspects. That is why the ECB decided at the beginning of August to continue its refinancing activities: that means each bank will be provided with full liquidity against securities. The credit volume currently amounts to around € 530 billion; 130 banks are currently using this liquidity; basically, 6,000 banks have been eligible thus far. According to Trichet, the total amount of collateral available amounts to about € 13-14 trillion; hence, said the ECB President, there was no liquidity problem. The ECB started its securities-purchase programme (for the purchase of government bonds) again in August. However, Trichet pointed out that the ECB has not bought debts directly as this is prohibited by the Treaty. The Central Bank therefore purchases securities on the secondary market with the intention to calm the situation on the currently poorly functioning financial markets. The liquidity made available is to be reabsorbed later. Trichet appealed to the Member States to observe strict budget discipline and engage in mutual monitoring.
Euro Group President Juncker: Package of measures adopted by the Council should be implemented speedily
The President of Euro Group Jean-Claude Juncker emphasized that trust had to be created and that the decisions taken by the Council concerning the European rescue package on 21st July had to be implemented swiftly. As to financial markets, Juncker said that he learned a proverb during his recent holiday in Austria: “Man soll nicht jeden Tag eine neue Sau durchs Dorf jagen” - directly translated: “One should not chase a new sow through the village each day” - which means that one should not come up with a new idea each day. A saying, which, according to Juncker, the financial sector should take to heart. The Council decision of 21st July with regard to the so-called “Six Pack” would help Greece to emerge from the crisis. The conditions, attached by Finland to the aid for Greece, were not helpful at all. Juncker was satisfied with the developments in Ireland and Portugal. Both countries have made good progress.
Little news from Economic Commissioner Rehn
Disappointing was the contribution of Economic Commissioner Rehn: structural reforms were necessary as were reforms concerning national fiscal policies; one had to make the most of the single market. Apart from that, it has now become necessary to implement the 21 July Council decisions. Asked about the Eurobonds, Rehn failed to give a clear answer. According to Rehn, Eurobonds were associated with substantially reinforced fiscal surveillance and policy coordination. Commission President Barroso will use the forthcoming speech on the state of the Union to introduce the proposals of the Commission on developing economic governance in the Eurozone.
Polish Finance Minister Jacek Rostowski sees solution in the “Six Pack”
Agreeing with Juncker and Rehn, Polish Finance Minister Rostowski also regards the Six Pack adopted on 21 July 2011 as the solution. The crisis could not be tackled without solidarity. This was a serious crisis; the slowdown in growth resulted in uncertainties on the financial market. There was hardly any scope left with regard to national budget policy; one has reached the limit, said Rostowski.
MEPs praise ECB and criticize Council and Commission
MEPs of all parties praised the action taken by the ECB. MEP Werner Langen of the European People's Party pointed out that in particular the slow implementation of the Council’s decisions had made it necessary to intervene on the financial markets. Nowadays, rumours are enough to create unrest and to provide speculators with profits of several hundreds of millions of Euros within minutes. The markets are to be decelerated and minimum retention periods for securities should be introduced. Representatives of the Social Democrats such as the MEP Liem Hoang Ngoc or the MEP Elisa Ferreira sharply criticised the Commission, which did not take any appropriate initiatives, and the Council, which merely looked for solutions at bilateral level. Apart from that, debt reduction was closely linked with growth, reminded the MEPs. The Council should stop blocking legislative proposals on short selling, bad debt insurance and similar dossiers, demanded MEP Udo Bullmann.
Sharp criticism for bilateral agreements by Sarkozy and Merkel
Other MEPs sharply criticised that the decisions are solely taken by Sarkozy and Merkel and that the EU was to plunge into recession. The liberal MEP Olle Schmidt remarked that the crisis was lacking in political leadership. The situation accordingly could lead to a tendency towards division within the Union; close cooperation was not only necessary within the EU 17, but also within the EU 27. The Green MEP Sven Giegold criticised that the 21 July Council decision only briefly calmed down the markets and that the Central Bank had to intervene and assume risks only a short time later. The ECB was the only institution currently capable of acting while at the same attracting criticism for this. The European Financial Stability Facility EFSF could only work if approved by each individual national Parliament. A genuine European economic union was thus required. Philippe Lamberts added to the statement of his party colleague and demanded to include the Financial Transaction Tax in the deliberations and maybe to introduce it in 2013/2014 already.
MEPs distance themselves from Finland’s demands concerning financial aid for Greece
The Liberal MEP Carl Haglund distances himself from his own governiment and regards the condition Finland wants to attach to granting financial aids for Greece as inappropriate. MEP Miguel Portas of the Left criticises that EU Bonds and jobs have never been mentioned. Banks should restrict themselves to financing the real economy, said the Green MEP Philippe Lamberts.
One of the next sessions of the Economics Committee could result in a debate with the French and German Finance Minister and the Council President, Van Rompuy, all of whom had been invited but did not follow the invitation of the European Parliament.