Belgian Presidency of the Council of the European Union

News - 29/09/2010 By antoine.simon2

Interview. As the informal ECOFIN Council meeting to be held on 30 September and 1 October draws near, we met with the personality who will preside over this meeting: the Belgian Deputy Prime Minister and Minister for Finance and Institutional Reforms, Didier Reynders. He is highly optimistic about the objectives that have been reached within the framework of this Presidency. Here is what he had to say in our interview.

This is a translation of the original French interview.

 

What is your role in this Presidency? Will chairing the ECOFIN Council change your daily work in concrete terms?

I already had the opportunity to chair the ECOFIN Council and the Eurogroup in 2001, during the preceding Presidency. What has changed today is that, on the one hand, we are no longer fulfilling the presidency of the European Council because its permanent presidency now devolves on Herman Van Rompuy. On the other hand, there is no longer any presidency to fulfil insofar as the EU’s foreign policy is concerned, because it is Lady Ashton who has responsibility for it.

These changes have led to the role of the ECOFIN Council becoming one of the most important within the framework of a rotating presidency, along with other Councils such as the Agriculture Council.

Therefore ECOFIN is taking on much more weight. The best proof, I have spoken about this with my colleagues, is that I just went two times in succession to the Parliament in Strasbourg where the vote on financial supervision was just done. This is one of the few debates in which the Belgian Presidency intervened. For the rest, only the President of the European Council, the President of the Commission and the Commissioners intervened.

 

Has your agenda been profoundly modified?

Whether I am the President or a member of the ECOFIN Council, very obviously I have the same number of meetings. But the fact of presiding in fact leads to an enormous number of contacts and meetings for preparation in parallel.

 

What are the priority work areas of the Belgian Presidency in economic and financial issues?

Before the informal ECOFIN starts and we try to move the dossiers forward, I believe that I can say that the principal objective of the Belgian Presidency in the financial sectors, and probably even in general, was to put in place new structures for the supervision of the financial sphere, as well as the Systemic Risks Committee.

I took responsibility for this dossier starting as at 1 July, with meetings at the European Parliament, at the Commission and at the Council. And this Wednesday, in Strasbourg, the texts have been voted on. As at 1 January, therefore, the new structures will be in place.

As I said to the European Parliament, this is finally the first major lesson drawn from the financial crisis that we have been experiencing for two years that is being realised. As many have asserted at the European Parliament, in a certain way this is a historic agreement: we are really transferring a competence of the States to the European Union.

I would tend to say, and I have spoken about this with some colleagues, that we have achieved the primary objective that we set ourselves for the Belgian Presidency, and therefore have accomplished what the Europeans expected of us. The rest of what is achieved will simply complete this.

It is true that we still hope finally to obtain an agreement on the European patent. Apart from that, all the decisions expected are once again in the sector of the ECOFIN: whether it is on economic governance, on hedge funds or on a whole series of regulations that must occur.

 

"Financial supervision" constitutes a first rank challenge for the Presidency. Could you explain, in concrete terms, what this idea means and in what way it is of vital importance for fighting against the economic and financial crisis?

In short, it is simple. We experienced a crisis that came from the United States. This crisis hit the European banks, including in Belgium, which were working and are still working, for that matter, in a very large number of countries. These banks therefore had cross-border activities in a whole series of European countries, or even throughout all of Europe.

But until now the control has been organised exclusively at national level. Therefore it was very difficult to see problems coming, since the information concerned a national market and not the unexpected arrival of the same types of problems in several different markets.

Solving problems and crises was also made very complex because it was necessary to have discussions with a great many different national regulators in Belgium, in France, in The Netherlands and in Luxembourg. This was the case in the Fortis and ING dossiers.

The change, a little like for the currency, is that from now on the two roles are being transferred to European scale.

On the one hand, the role in prevention: the information concerning what is happening on the financial market will be much more centralised. The goal is to avoid crises (like the case of the subprimes, the case of toxic assets, etc.) If, starting as at 1 January, we can have a new European authority, it will receive information from Spain, Ireland, Belgium and a whole series of countries. It will become aware that something is happening much more easily, therefore. While with purely national structures, as is currently the case, it is much more difficult to be aware of the magnitude of the crisis. Therefore we will be able much more easily to prevent the crisis.

On the other hand, in the case of an actual crisis we will have a much stronger ability to act and react, because authority has been established at European scale.

 

So the objective has already been achieved?

Obviously we have to remain realistic. This is in fact a very important time, a historic agreement, but it is also the beginning of a process. Now it is going to be necessary to prove, starting as at 1 January, that these new European authorities will work and that consequently we can entrust them with more authority.

I am convinced that in the next few years we will have an authority that is more and more strongly anchored at European level, a little like the Central Bank. It will be a matter of collecting information and managing cases at European level, instead of having to have a large number of national actors working individually. Consequently we will have a better ability to detect problems, and therefore can react more quickly. The primary objective is to avoid crises. Therefore above all sound, effective prevention structures are required.

 

You see this achievement as a foundation, then, and the rest will be built "brick by brick"?

Yes. It is actually a framework that is going to be filled in brick by brick. In fact, there are two elements. Currently structures are being put in place: supervision of banks, insurance companies, financial markets, and the “Systemic Risks Committee” which will monitor everything that could have an impact on a potential crisis in the banking world which, as we have seen, has very extensive economic and social consequences for all countries. This is a matter therefore of verifying that, at several places in Europe, there are no new elements which could give rise to the fear of a crisis in the banking sector, with its set of consequences for companies and for employment.

That’s the framework, the structure. It is necessary to add specific rules to this. Let us take an example, because it is currently on the table. There are rather strict rules for the supervision of banks. But what is done for other types of investment funds? There has been a great deal of talk about covering funds, hedge funds. These are not necessarily the origin of the crisis. But is it possible that the rules that are imposed on banks could also apply to the other actors, who can have the same influence in the end? This is precisely what we are trying to do.

There are also, this is going to be discussed at the informal ECOFIN, regulations on the rating agencies. There has been a great deal of talk about these agencies. Everyone refers to them to analyse the soundness of a product or an institution. Could more significant responsibility be imposed on them? Beyond the architecture, therefore, we’re going to have to enact a whole series of specific rules pertaining to certain activity sectors.

 

Brief question now on the 2020 Strategy. What is the contribution or the role of the ECOFIN in relation to this strategy?

Traditionally, the ECOFIN plays the role of a driver here. In fact it is within this framework that the whole of the analysis of the major orientations of economic policies and the definition of what could be “strategies” are brought together.

The role of the ECOFIN within this framework is connected with three principal elements. First of all, how can we come back toward a budgetary equilibrium, and therefore avoid having countries go too deeply into debt, with the consequence of having future generations pay the cost of this indebtedness? It is necessary gradually to come back to budgetary orthodoxy.

The second thing, starting from the time when we know that there will be more difficult times from a budgetary point of view, is figuring out how to preserve growth, job creation, investment in research, etc. In a certain way, then: how can we concentrate more on what is called “the quality of public finances”? In spite of rigorous austerity measures, will public finances make it possible to sufficiently finance education, training, research, and all the elements that support growth and employment?

The third element is that it is necessary to equip ourselves with much more effective tools. It is necessary to concentrate on certain objectives. And if they are not achieved, it is necessary to know what the capacity for action, or even of sanction or of pressure of the EU on the States will be. In other words, what can be said to a State if it drifts on the subject of competitiveness, employment, research, education, etc.?

In short, alongside monetary policy, which is centralised by the Central Bank, there remains the problem (since the beginning of the creation of the euro, or even before) of economic governance. Alongside monetary policy, could we have an integrated budgetary and economic policy in the broad sense?

 

To conclude, what are your expectations for the informal ECOFIN Council? What does this type of informal meeting contribute, in comparison with the formal meetings of the Council?

We have one of the formations of the Council (with the General Affairs Council and the Agriculture Council) that experiences the most meetings. For a large number of formations of the Council, the big problem is that the ministers meet only a few times a year. Where we are concerned, we see each other at least once a month. And not just for one day… This week, for example, we will see each other on at least three days, at different times of the week. The meetings are thus rather frequent.

The informal meeting has the advantage of allowing discussions that are even more open and more direct than during a formal Council, which requires a strict agenda and the adoption of a set of very concrete points.

 

What are the objectives counted on from an informal Council?

On the one hand, to make dossiers move forward that are blocked or could be blocked. As we did for supervision these last few weeks, we are going to debate on hedge funds and investment funds. We hope to return a directive on this subject to the European Parliament in the month of October.

We are also going to try to push forward more political debates: on the taxation of financial transactions and on the contribution of the banks (in other words, a levy on the banks with a view to financing the resolution of the next crises that occur in the banking sector).

Finally, we will conduct an evaluation of the way in which we are progressing in our reforms of the financial market in Europe in comparison with what is being done in the United States. To do this, there will be a series of speakers and of high points: we are waiting for the attendance ofDominique Strauss-Kahnat a part of the meetings to be confirmed. I have also invited the heads of the principal rating agencies to a breakfast. These are the things that can be done during an informal meeting, which cannot be achieved during a formal Council.

Traditionally, the informal meeting in September also prepares for the meeting that will take place in Korea (G20) and the meetings of the IMF that will take place during the month of October in Washington. We are trying to have a common European position for these major international meetings.

 

The final word: any special message?

My message is that it is necessary to try to integrate the management of the financial markets and economic governance. This is what we are trying to do at European level. But it is necessary to try to achieve this at planetary level.

During this ECOFIN meeting, therefore, we are going to try to carry a European message that shows that there is an interested, at the scale of the world, in acting in such a way that the major actors (the emerging countries, the United States, Japan, China, Europe) really play their role in world governance. But if we’re going to argue for this, it is necessary to show that we are capable of doing it in Europe. It will not do any good to argue for international government on the world stage if we are not capable of taking the first steps ourselves.

What we have just achieved concerning financial supervision is a real European success. If we succeed in extending this into other European decisions, we will benefit from greater credibility when we say to the other major actors: “let’s do it at international scale as well”!