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Member of the European Commission, responsible for Internal Market and Services
Restoring stability and growth: Europe is taking the right decisions
U.S. Chamber of Commerce
Washington, DC, 23 February 2012
Excellencies, Ladies and Gentlemen,
I am very pleased to be with you today. I would like to thank the U.S. Chamber of Commerce, and Vice-President Gary LITMAN in particular, for organising this event.
Europe is facing difficult times. Europe is in technical recession with signs of mild recovery for the second part of 2012.
There are some positive signs. For example in Germany and in the Baltic region.
Governments everywhere in Europe are taking measures that would have been unthinkable even five years ago.
But economic activity is expected to stagnate in the coming months.
But my conviction is that the heart of the Eurozone crisis is a crisis of governance and of confidence.
Our determination and political unity are being tested.
We often hear that European leaders are reacting too slowly. That we lose time on endless discussions. Always looking for consensus instead of taking bold action.
I don't agree.
This is not a sprint. It is a marathon. If you run too fast, you may well trip over. And you may never reach the finishing line.
Don't forget that the Euro area contains 17 sovereign countries. They all need to buy in to the solutions. If they don't, any action is bound to fail.
Ladies and Gentlemen,
What are we doing to tackle the sovereign debt crisis?
Ladies and Gentlemen,
Yes, these rules should have been agreed when the Euro was introduced 10 years ago.
We were under the illusion a monetary union could work without a budgetary union.
We were wrong.
But we are taking the right decisions now.
And if you look back, the progress made in the last 2 years is extraordinary.
Ladies and Gentlemen,
Financial regulation goes hand in hand with greater stability.
In a few weeks, the European Commission will have tabled all the texts implementing the G20's financial regulation agenda.
This will transform G20 commitments into binding European law.
We are changing the face of European financial markets.
I now expect similar progress on this side of the Atlantic. We must avoid overlaps and loopholes.
In short, we are committed to an ambitious regulatory agenda. And we are delivering.
Now, looking forward, what else needs to be done?
Let me mention three points.
The global crisis calls for global responses.
G20 members are committed to a single roadmap. We must now live up to this commitment. There must be no room for regulatory arbitrage.
The Financial Stability Board coordinates regulatory reform and monitors implementation. It is the relevant global body for financial services. It needs to be beefed up. We must give it a secure legal status. Its governance must be improved.
We also need to ensure all G20 members do their share of the work. Not just the USA and Europe.
Strengthening banks worldwide is essential for financial stability. In July 2011 we proposed a comprehensive reform package to comply with Basel III in Europe.
I am sometimes told Europe has watered down Basel III. That we are less strict on issues like the leverage ratio and the treatment of financial conglomerates. I disagree.
Contrary to other parts of the world, we apply Basel III to all our 8000 European banks. This requires certain adaptations. But we fully respect the Basel-agreement. Both the letter and the spirit of Basel.
In this area, like many others, the EU has once moved first. And we hope that the US will soon follow.
This was one of the points I made to Secretary GEITHNER and to Chairman BERNANKE this morning.
I also asked them for an update on the implementation of Basel 2,5. Increased capital requirements for positions in the trading book are mandatory for European banks since the 1st of January this year. I am concerned about delays in implementation in the USA. I am worried about a level-playing field.
Our existing agenda is very ambitious. It will restore stability. But we should be ready to take additional measures where needed.
I am thinking here about shadow banking for example. We need to be ready to act. Europe is participating fully in the global discussions. And we will soon launch a public consultation.
Another issue: structural reforms of banks. You have the Volcker rule. The UK has the Vickers report. I have just set up a High-level Expert Group to look into the pros and cons of all potential options.
But discussions on any of these issues need to also be done globally. National rules can have serious effects abroad.
That is why I am concerned about your proposed implementation of the Volcker rule.
I do not question the objective.
I discussed it with Paul Volcker himself about a year ago. We must control risks. We must counter perverse incentives in banks. Structural measures and robust firewalls are needed in the financial system.
But I do question the approach in terms of application of the rule chosen by the US Congress and US financial regulators.
It is not acceptable that US rules have such a wide effect on other nations and foreign capital markets without any international co-ordination. I mentioned this to Tim Geithner this morning. We had a constructive discussion.
A unilateral approach is a path to fragmentation and inefficiency.
We need more international co-operation in all these areas.
This is the message I am bringing to all my US counterparts: think international.
Let's work together not against each other.
Going it alone wont benefit any of us in the long-run.
The choice is not "regulation OR growth". It must be "regulation AND growth".
How do we do that?
First, by creating incentives for financial institutions to take the long-term view. By putting an end to short-term behaviour. Rules on pay and corporate governance can help provide the right incentives.
Second, we all know that bank deleveraging is necessary. But it should not take place at the expense of financing the real economy. This is crucial in Europe, where companies are largely financed by banks.
Third, we need to look at risk weights for real economy investments, especially for loans to SMEs. I would welcome international coordination in this field.
Fourth, we need to enhance the protection of consumers and investors. They must have access to clear, targeted information about investment opportunities. This will be our regulatory focus for 2012.
Ladies and Gentlemen,
Financial regulation will help secure financial stability.
It will help avoid further crises..
But it won't restore alone sustainable growth.
What is our best asset?
For Europe, I think the answer is simple: Europe's Single Market, with its 500 million consumers and 22 million companies.
Our Single Market can work better. It has not reached its full potential.
That is why I put forward the Single Market Act last year. With 12 drivers for growth, competitiveness and social progress.
A few examples:
1) We are very close to a final agreement on a Single European patent. An idea that we have been discussing for more than 30 years.
2) We want to make it easier for SMEs and social businesses to access finance. We are creating a European passport for venture-capital and social investment funds, so they can operate easily across Europe.
3) We are creating a real Digital Single Market. We want to double the volume of e-commerce in Europe by 2015. And increase consumer's trust in cross-border online shopping.
4) And we want to modernise public procurement. E-procurement will be promoted to reduce costs. SMEs will benefit. We will continue to insist on more reciprocity with our major partners.
Ladies and Gentlemen,
In conclusion let me stress one point which is often overlooked in the debate here in the United States.
The European Union, its Single Market and its Single Currency are historic ambitions of European nations.
Fundamentally shaken by the memories of two wars that tore a continent apart, European countries voluntarily chose to pool their sovereignty.
They chose to pursue together peace, stability, prosperity and the wellbeing of their people.
This objective is as valid today as it was 60 years ago when this unique project kicked off.
Being a member of the EU or of the Eurozone is an asset, not a liability. And each Member Country is an asset to the Union, not a liability. We will welcome a 28th member to the Union next year, Croatia.
Those who think that the EU is only a matter of transfer of funds from the well-off to the less well-off fundamentally miss the point.
All our Member States are better off because of the European Union. And the European Union needs all of its Member States.
But the positive aspects of the Union come with responsibilities that must be met.
Yes, we have made mistakes along the way during the EU's 60 years of existence.
But the EU has a proven history of growing stronger in difficult times. Challenges motivate us to improve and carry on.
The European Union is here to stay. The last couple of years have not been easy. But we are making the necessary changes to transform the EU into a source of stability and growth that our children and grandchildren will benefit from.
We will exit this crisis better organised and more integrated. We are not at the end of the road. As Chancellor Merkel has said, we need to make a further step towards political integration. We must now build with the citizens the next stage of a political union. We have strengthened the economic union. We now need to apply the same impetus to our foreign, security and defence policy. It is in our common interest to do this.
And when Europe is strong, the US and the world economy and stability benefit too.
Thank you for your attention.