José Manuel Durão Barroso
President of the European Commission
Remarks of President Barroso at the Press conference with Commissioners Rehn and Barnier
Brussels, 2 June 2010
The Commission has been working hard to limit the impact of the economic crisis, accelerate the pace of fiscal consolidation and structural reforms, bring trust and responsibility back to the financial markets and put us on a path to sustainable growth.
This requires a comprehensive, coherent and determined reform effort to address all the weaknesses that we have seen over the last two years. We have delivered a lot.
Today's proposals on proper regulation of Credit Rating Agencies and good governance of financial institutions are important ingredients of our strategy. But there is still a long way to go.
And this is just part of a much wider effort to get the economy back on track.
My message today is that everyone must raise their game. We are asking important efforts from public authorities and from our citizens to boost the economy. Financial markets must participate in that effort too. We want strong and solid financial markets in Europe and globally that have the confidence and trust of the public and investors.
That means giving supervisory authorities sufficient information and the power to act early when a problem arises. It means designing a common approach so that there is joined up and consistent oversight of financial companies across borders. The Commission proposed the necessary measures on supervisory reform last summer. It is now urgent that the Council and the European Parliament to speed up their work. We want the new Authorities in place by 2011 so that they can take up tasks such as the direct supervision of credit rating agencies that we are proposing today.
We also need measures to regulate the behaviour of actors in the financial markets. We have seen both in 2008 and in recent weeks a tendency of not looking enough at the fundamentals, of not looking enough at the long term, of following the trend in the hope of making some short term gain. This needs to change.
This is why I am asking Michel Barnier to present his proposal on derivatives by the end of the summer.
That is why, in October, we will bring forward further measures to address the issue of short selling and increase transparency on Credit Default Swaps, based on the results of the ongoing in-depth investigation.
And that is why, in September, we will go beyond today's proposal on Credit Rating Agencies and come with ideas for reducing reliance on ratings and promote competition and alternative benchmarks. We are paying specific attention to sovereign debt.
There is an emerging view in Europe and internationally that the deficiency in the current rating processes has not yet sufficiently addresses. The lack of competition is of particular concern. Without favouring any particular option at this stage, the Commission is examining structural solutions including the need for an independent European credit rating agency or stronger involvement of independent public entities in the issuing of ratings. Personally, I think that it would be useful to examine what role European bodies or undertakings active in credit insurance could play in this field.
Today we also present our assessment of the implementation of the Commission's recommendations on remuneration. I have to say: the results are disappointing. In the light of this, we now need to ask the question of whether we need to regulate for all listed companies as we are already doing for banks, hedge funds and other financial actors.
Financial markets must also contribute to solving their own future problems. That is why we have put forward proposals on Bank Resolution Funds. I hope these will be adopted quickly. Of course, this does not exclude other options to combat excessive risk and at the same time help recover funds for the public purse. I am personally in favour of a financial transaction tax or a profit tax. And, like the IMF, I think these can be complementary tools to resolution funds, meeting different objectives.
A sound financial sector is fundamental. The Commission will deliver most of the remaining proposals by the end of the year, all of them within nine months. Today I call on the Council and the European Parliament to share our determination and to aim to complete their work by the end of 2011.
It will put the EU squarely in a leadership position for the G20. The Commission has made a point of delivering its proposals with speed, putting the EU ahead of the curve, delivering quicker than any other international partner on the G20 commitments. Later this month, I will take that EU position to Toronto and push our partners to follow suit, including on a financial institution levy.
But to get the economy back on track, we need more. We need to regain the confidence of consumers and investors. And this can only be done if we show we are serious about putting order into our public finances. Austerity is not a means or a purpose in itself. It is about getting the tools of economic policy back in shape. There is simply no room for more deficit spending.
I do not believe there is a contradiction between fiscal discipline and growth. In order to prevent that short term fiscal discipline has a negative effect on growth, we need to combine it with structural reforms. Growth will come from addressing the root causes that underpin a lack of competitiveness. And it will come from focussing public spending in a sound budgetary framework on those areas that are strategic for future growth, which is exactly what our Europe 2020 strategy is about.
The Commission's proposals for a European growth strategy are clear. Sound public finances, increased competitiveness, investing in areas that generate future growth and building trustworthy financial markets are the core components of what is needed and what the Commission has proposed. Our 12 May package on economic governance, our Europe 2020 Strategy and our proposals for sound financial markets provide the ingredients for stabilisation, consolidation and a dynamic recovery. It is a holistic approach that is needed if we are to return to the path of sustainable growth.
I believe we can only deliver these goods if all Member States commit to it, and if our society as a whole is involved. This is why I attach the utmost importance to the social inclusiveness target in Europe 2020. Our efforts cannot be made on the backs of the poorest. And while we move Europe forward, no-one should be left behind. We should commit that our investments in the future will be done in such a way that we lift by 2020 20 million Europeans out of poverty.
To conclude, the Commission has put on the table ambitious and sound proposals.
Europe must and will deliver a comprehensive approach that allows EU to stabilize, to consolidate and to get dynamic growth.
And Europe must and will deliver a strong and united position for the G20 Summit in Toronto.
I would now like to ask Olli Rehn to give his assessment of the economic situation before turning to Michel Barnier to explain the financial market proposals we have adopted today.