One week before the G20 Summit in Pittsburgh, the 27 EU heads of state and government published their joint position on the crisis. The intention is to continue with the reforms in the financial sector and to tackle the precarious situation in the labour market. Also requested is more transparency with regard to manager salaries and to increase the core capital of banks. Although a substantial part of the position has been devoted to climate protection, there is the general feeling that no binding agreements will be signed.
A week before the G20 on 24th and 25th September in Pittsburgh, the EU27 published their joint position on 17th September. In it, they once again emphasised that on the one hand the state measures as a result of the crisis should be continued next year, that on the other hand, however, one had to start thinking about coordinated exit strategies. Employment and social cohesion, stated the EU heads of government, had to be at the centre of political efforts. Hereby, special reference was made to the “Global Jobs Pact” of the “International Labour Organisation” (ILO), which was adopted in June of this year. This paper asks governments among others to make public infrastructure investments preferably in “green energies”, to start targeted employment programmes and to expand both social protection and minimum wages. According to the G20, ILO should also be given a more important role in assessing these programmes.

In their statement, the heads of government of the EU Member States also demand a clear commitment of the G20 against protectionism and the conclusion of the DOHA round still in 2010.

Proposal for new European system of financial supervisors before G-20 meeting

The role of the IMF, in cooperation with the Financial Stability Board (FSB) should be strengthened in future in order to introduce a globally coordinated system of financial markets supervision. This Wednesday, the European Commission introduced its proposal for setting up a new European System of Financial Supervisors (ESFS), whose aim it is to strengthen and to better coordinate the already existing committees for banks, insurances and pension funds. The objective of another authority, the “European Systemic Risk Board”(ESRB), whose committee is made up of the Governors of the National Banks and the President of the ECB, is to overall supervise and assess risks for the stability of the financial system. The role of the ESRB is to give early warnings of looming system risks and to recommend concrete measures if required. The intention is to inform the European Council if a Member State does not adhere to these recommendations; in this case the Member State would have to expect “severe consequences”. It was, however, not elaborated on what these consequences would look like in detail. The new authorities, if EU Commissioners Almunia (Economy and Finances) and McCreevy (Internal Market) would get their way, would take up their work at the end of next year already.

Reducing manager bonuses, increasing capital requirements

Whilst over the past few weeks, Germany, France and a number of other European States came out in favour of limiting bonuses, the EU Paper now only states that manager salaries should in future depend on the longer-term profit development of the banks and that bonus payments should be “in proportion” to the fixed salary to counteract excessive risk taking by managers.
Another point on the agenda of the Summit is a mandatory increase of capital requirements for banks to have a greater buffer in times of crisis in future. The idea that in future only share capital should be regarded as core capital would also have an impact on some Austrian banks, whose share capital is lower than the European average.

Commissioner regards Financial Transaction Tax as a “very good idea”

During an interview this Thursday, Commissioner Almunia drew attention when he came out in favour of a global tax of ca. 0.05 % on all transactions in the banking and insurance sector as well as on investment funds. The income from this tax could be channelled to the poorest countries in form of development aid; this would at the same time relief public finances. Almunia, however, conceded that the implementation of such a tax would probably be very difficult. In their joint statement, the heads of government also addressed the subject of development aid for the poorest countries. The statement says among others that the G20 should fulfil their obligations, they committed themselves to within the scope of the Millennium Development Goals and the “Everything but Arms” Agreement, which grants developing countries duty-free access to the G20 market.

Preparations for the Climate Summit in Copenhagen

The last two pages of the seven-page position have been dedicated to climate protection and the preparation of the Climate Conference in Copenhagen. In order to achieve the “2 degree goal”, greenhouse gas emissions of the industrial nations have to be reduced by at least 50 % by 2020 compared to the 1990 level. The burden of public financing of climate protection, should - dependent on the ability to pay and responsibility - be jointly borne by all countries. The Commission expects additional costs of Euro 100 billion per year for reducing emissions in developing countries by 2020. To help with financing it has been recommended to expand among others the international market for trading with CO2 certificates. On Monday of this week, however, a speaker of the Commission did not appear to be very convinced that the subject of climate protection would play an important role at the G20.

Further information:

Position of the EU Heads of State and Government for the G20 Summit

Press release: Commission adopts legislative proposals to strengthen financial supervision in Europe

European System of Financial Supervisors (ESFS): Frequently Asked Questions

Information on the European Systemic Risk Board