Last week, I was in Brussels for a few days. I was there on other business but my visit coincided with the meeting that selected the new President of the European Council. This is a job for which I had put my own name forward for consideration by the 27 Governments represented in the Council.
I believe Herman Van Rompuy will be a very good President. He has a detailed grasp of economics having written several books on the subject. He was Belgian Budget Minister during the build up to the launch of the euro and understands the dynamics of the European Union. He also was economical in the spending of public money, a characteristic that is vitally necessary if European states are to survive the twin long term challenges of economic restructuring and ageing.
The current economic crisis has laid bare certain structural weaknesses in the European economy. Essentially we are overcommitted in some industries, finance, construction and motor cars. Employment will fall in those industries and new employments will have to be found elsewhere. Restructurings of that kind do not occur quickly or easily. It took Germany ten years to create the export oriented economy it has today. It is good that the EU’s President is someone that understands economic processes.
While in Brussels, I had a very useful briefing fro officials of the European Commission on the large package of reforms of the financial system that the are piloting through the Council of Ministers and the European Parliament at the moment. It is important that whatever is done in Europe be equivalent in its effects to the legislation being advanced by Senator Dodd and Chairman Frank in the United States. If the legislation is equivalent in the sense that it achieves the same results, even if by different means, then financial businesses will be able to operate on both sides of the Atlantic without too much costly duplication of compliance with different sets of rule because the authorities will mutually recognise one another’s permits.
I hope the package will include a ban on trading in risky securities by banks that take deposits from the general public. Deposit taking institutions are ultimately backed by the taxpayer and they have no business being engaged in gambling with the people’s money. An outright ban on certain activities would be simpler and easier to enforce than a complex system of supervision of activities which is always, of necessity, taking place after someone has done something.