NEWS | Wednesday, 03 December 2008

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Ecofin slams EC over bank regulation

Matthew Vella
Finance ministers in the EU’s Ecofin council yesterday met in Brussels where they agreed to implement all measures in response to the financial crisis swiftly to improve the functioning of the credit market and restore credits to companies and households.
In order to step up the protection of individual savings, the ministers reached a political agreement that would lead to a reduction of the current pay-out delay from 2011 onwards, increase the minimum level of coverage up to €50,000 from July 2009 onwards, and harmonise – subject to a Commission report – the level of coverage at €100,000 by end 2011.
There was also broad agreement over the European Commission’s €200 billion stimulus package – around 1.2% of the EU’s overall economic output.
Germany is not entirely convinced of the need for an EU-wide response, pointing out that it has already pumped tens of billions of euros into its banking sector.
French President Nicolas Sarkozy was critical of Germany’s stance. “While France is working, Germany is thinking,” he said.
The Council said it was committed to reaching an agreement with the European Parliament before the end of the year in order to ensure a rapid entry into force of the directive.
The Council stressed that until financial stability has been fully restored, the actions related to the resolution and management of financial crisis remain the top priority within the EU.
The EU competition commissioner Neelie Kroes came under criticism when she said she was expecting banks that receive state aid to give commitments to lend to the real economy.
She said national rescue schemes should include incentives for the state aid to be returned.
The commissioner made it clear that she wanted banks to lend more in return for government help. “I would expect commitments to lend from banks benefitting from state aid,” she told the finance ministers.
Ms Kroes said she did not want to prevent banks that receive public money from paying dividends. “The individual situation of each bank should be taken into account,” she said.
The European Commission has been under pressure to approve various bail-out plans proposed by member states. New rules regarding state aid are expected to be approved by Christmas.
Kroes also demanded that member states implement financial bail-out plans with caution, in order to avoid distorting the competition. “We need to make sure that all the schemes broadly fit together and that their main effect will not be to advantage one national banking sector to the detriment of other member states,” she said.
But many national governments said the EU was being too “bureaucratic” in its approach and called on the EU to relax its rules on state aid.
“In the face of a financial market crisis of this scale, we cannot proceed in a bureaucratic fashion,” said German Finance Minister Peer Steinbrueck.
EU finance ministers also put the idea of group supervision of the insurance sector on ice at yesterday’s monthly meeting in Brussels, despite many commitments to improve the financial control of multinationals.
EU leaders loudly called for better and more coordinated supervision at global level ahead of the G20 meeting in Washington on 15 November. The idea of an EU common supervisor hovered around in the most critical days of the financial crisis.
However, the boldest proposals from the Commission only involved group supervision, exclusively for the insurance sector.
The eurozone’s finance and economy ministers yesterday decided not to follow the example of the UK – a non-eurozone country – in lowering VAT rates.
The idea of lower rates for labour-intensive businesses, a topic of particular importance for France, was the subject of a long debate but no agreement was reached.
It will now be raised on 11-12 December when EU leaders meet for their winter summit.

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