EU presidency issues warning over financial supervision

ANDREW WILLIS

10.11.2009 @ 17:44 CET

EUOBSERVER / BRUSSELS – The Swedish EU presidency issued a stark warning on Tuesday (10 November) on the need to agree plans to overhaul financial supervision within the bloc.

"If we don't have a decision in December on the whole package …then I would say that we have not drawn the right lessons from the crisis," said Swedish finance minister Anders Borg after a meeting with his EU counterparts in Brussels.

• Print
• Comment article

Experts from the member states are currently discussing commission proposals on financial supervision that were published in September.

Agreement has been reached on the need to set up a European body to monitor risk in the European financial system as a whole, but discussions are ongoing over the more controversial proposals at the level of individual firms.

The commission proposals call for three new authorities in the banking, insurance and securities sectors to be set up to help co-ordinate national supervisors, but their exact powers are being hotly debated in council backrooms.

The UK would like to see the authorities concentrate largely on co-ordination rather than take direct decisions that could affect firms, and also wants to see a safeguard clause giving member states a right to appeal authority decisions extended to a greater array of areas.

Mr Borg's warning followed a discussion between finance ministers on how to co-ordinate member state exit strategies from the exceptional measures deployed by governments to tackle the financial crisis.

The ministers followed the euro area's lead in calling for exit strategies to start in 2011 at the latest, assuming sufficient economic growth, but said further debate was needed on withdrawing support measures for the banking sector.

"The most important part of our financial system exit strategy is the building of a new financial infrastructure," said Mr Borg. "We can talk till kingdom come but what we really need is a political agreement in December."

The Swedish presidency is expected to come forward with a compromise text within the next 10 days, leading into a crucial meeting of finance ministers next month and subsequent EU leaders' summit.

Deficits

Despite the presidency pronouncements, Tuesday's debate centred largely on budget deficits, coming a day before the EU executive is set to hand Germany and seven or eight other EU countries a set of deadlines by which they must correct their spending overruns.

At the same time the commission will issue reports to France, Spain, Ireland, Greece and the UK assessing their efforts to bring deficits into line. Of the five, only Greece is expected to receive a Commission rebuke for not doing enough.

"In the case of Greece, both the present Greek government and ourselves consider that effective action has not been adopted," EU economy commissioner Joaquin Almunia told journalists.

The failure opens up the possibility of the southeastern country being the first member state to receive a fine for non-compliance with the bloc's Stability and Growth Pact.

Under the pact, member states are required to maintain their budget deficits within 3 percent of GDP.

Although the vast majority of EU states are no longer in compliance, Greece's apparent unwillingness or inability to rectify the problem has drawn criticism from commission officials.