EMI Workshop “Lessons from the financial and economic crisis and its implications for the future of the EU”

Today we can hardly imagine a sector of our economic, social or political system that has not been affected by the crisis. The vicious cycle of weak banks, weak sovereigns, speculation, and negative economic outlook has also led to a crisis of confidence in the euro area and in our political institutions.

The myriad of small steps and piecemeal measures have not yet succeeded in overcoming the crisis. We at the European Economic and Social Committee are therefore concerned that the economic policies currently being pursued in the EU – fiscal compact, austerity, budget restraint at national level, limiting the EU budget, etc. – are initiating a recessionary process with unpredictable effects at a time when what is needed is the opposite, i.e. steps to support growth and jobs with more courageous and effective proposals. But what proposals?

EESC proposals

Our Committee held a major conference with representatives of all the European partners and leaders of the European institutions on 25 September last. Its conclusions have been sent to all the EU leaders, and consist in a comprehensive set of 30 specific proposals. I wish to share some of our main ideas with you now.

For the EESC, the EU first and foremost requires the necessary political will and a precise vision of substantially closer and better European integration. What we need is a comprehensive approach to sustainable growth and employment, a European plan for growth – a "New Deal" if you will – that should be launched with more involvement of civil society organisations.

This plan should be based on:

  • genuine Economic Union, including a financial and banking union, as well as fiscal union;
  • a Social Union, with stronger respect and support for fundamental rights;
  • and a Political Union, with new levels of democratic responsibility and accountability.

Why a social union in addition to political and economic union? Because a sustainable growth economy must never lose sight of the overall goal of promoting well-being and social progress. If certain austerity measures are necessary, then they must be socially balanced. We need more transparency and civil society participation in decision-making. We need social governance flanking economic governance.

One of the main elements in a genuine economic union would be a fiscal union with joint issuance of debt instruments. The EESC has already presented its views on this in an innovative proposal for two distinct types of European bonds:

  • untraded bonds to stabilise existing debt – these would be composed of converted national debt of up to 60% of GDP;
  • traded bonds to stimulate growth by attracting capital from outside the EU and by co-financing investment projects led by the EIB (European  Investment Bank) and the EIF (European Investment Fund).

We should also acknowledge the fact that the debt market is significantly influenced by credit rating agencies. Here, the EESC recommends strengthening the civil liability of ratings agencies and setting up a European ratings agency that would issue independent ratings.

On tax coordination policy, we want to go further because we believe that the financial sector should contribute to the fiscal consolidation efforts in a fair and substantial way. This is one of the reasons why we support the commission's proposal for working on a Financial Transaction Tax (FTT) at global level, possibly agreed within the G-20.

One of the reasons for the systemic financial crisis was inadequate and ineffective regulation and supervision of financial markets. Financial and Banking Union should be based on several building blocks, including a single supervisory mechanism, a common framework for bank recovery and resolution, and harmonised deposit guarantee schemes.

National action in this field is clearly not enough. The dilemma of "too big to fail" has to be resolved through appropriate Europe-wide instruments. The EESC therefore calls for prompt agreement on the entry into force of the Single Supervisory Mechanism (SSM). We are in favour of the ECB assuming responsibility for supervising all banks in the banking union, with clear separation of its supervisory and monetary functions.

The idea of a European Monetary Fund was floated back in 2010. The EESC proposed that a permanent procedure and framework for conditional financial support be created in addition to the temporary European Financial Stability Facility (EFSF). Along these lines, Member States agreed later to set up the permanent European Stability Mechanism (ESM) that was formally launched on 8 October 2012. We fully support the immediate activation and use of the ESM.

As regards current work, we are now considering where the euro is headed, with a public hearing to be held on the subject on 19 February 2013. Among other things, the debate will explore new ways of financing the economy, especially for SMEs, which lack access to credit. This could be done by making better use of EIB and EIF leverage potential, rather than through fiscal transfers. Bonds issued by these institutions could also provide an innovative way of turning the global savings surplus into productive investment in the EU.

Finally, a word about investment policy. I think we all agree that financial stability alone will not assure recovery. Recovery should be investment-led. A European investment policy, of which cohesion policy is one aspect, should be geared towards social, technological and green investment: health, education, urban renewal, the environment, the TENs and projects submitted under the research framework programmes – these are the major axes that should guide European investment policy.

Concluding remarks

To sum up, the tools and measures for overcoming the crisis must focus on socially and environmentally sustainable growth and employment, combining innovation, investment in pan-European projects and economic efficiency. This will improve European competitiveness and resilience in the long term while stimulating growth and creating employment in the short term.

If people are unsure that they can keep their businesses or jobs, they will choose to save or reduce personal debt rather than invest or spend. And here we come back to the question of confidence, among both investors and consumers. The added value of our opinions lies is the fact that the EESC is a bridge between Europe's leaders and representatives of civil society, with a bottom-up up approach and proposals based on consensus. 

We should all step up our efforts to promote confidence in a comprehensive and dynamic European growth model, to restore trust in the economy, to ensure legitimacy in EU decision-making, and to renew hope in the European project. Let us step up for a stronger Europe!


Staffan Nilsson`s speech at the EMI Workshop “Lessons from the financial and economic crisis and its implications for the future of the EU”