EU Parliament: It takes real banks to fight unemployment and recession

The European Parliament has a unique ability to identify the key issues in the Union’s conjuncture, not only in the political but also in the economic front. Seemingly the close contact of its members with their constituents is at the heart of this special property. Seen under this light, the last Parliamentary debate on what should be the priorities of the next European summit of 27-28 June produced an accurate account of the Union’s problems and the badly needed policies. In this debate participated also the Council Presidency and European Commission President José Manuel Barroso. According to a Parliament Press release issued after the debate, those key issues are how to “create jobs for young people, solve the banking crisis and get an agreement on the EU’s long-term budget”. All three themes constitute the major battle fields for EU decision makers. The second one however, the banking crisis, is rarely mentioned like that any more and all EU and ECB dignitaries insist that the European banking industry has now left behind its worst moments. Not everybody however agree with that. Let’s take one thing at a time. Unemployment of the young Starting with the unemployment of the young, Eurostat data are incontestable, describing accurately the dimensions of the problem. Despite this generally accepted reality, the remedies proposed vary considerably. The main differences are to be found in the way Germany and the south Eurozone countries see this affair. The Berlin government doesn’t think that this huge socio-economic issue can be addressed with special measures entailing more government spending. For one thing Germany says that the unemployed of the south can look for a job in the north. But this offer hasn’t worked. Passing now to the second issue that the Parliament considers of crucial importance, the banking crisis, the Parliamentarians didn’t chew their words while debating it. They called it a crisis despite the fact that many EU decision makers insist that it isn’t any more. Guy Verhofstadt, the Belgian leader of the ALDE group used very strong words in describing this problem. He stressed that “the most important issue to solve is the banking crisis”. He even went as far as to say that, “The recapitalisation of banks will restore the transition mechanism between banks and SMEs, which will create new jobs”. Recapitalising the banks Of course Verhofstadt is concerned about the unemployed, not the bankers. Still he tells the money sharks that their institutions are not functioning properly and cannot serve the real economy as they are. In this affair he goes to the heart of the problem telling the bankers that they have to recapitalise their lenders, because as they stand now they are quite useless. They cannot perform their basic duty which is to finance the backbone of the economy, the SMEs. Other people who care more for the bankers and less for the unemployed also agree with Verhofstadt’s observation, about the present undercapitalisation of the European lenders. The working group of experts of the Ecofin Council has reportedly prepared a proposal to be submitted to the Eurogroup meeting of 20 June, on the need of recapitalising EU bank directly from the European Stability Mechanism. Money from the ESM The proposal sets a limit to the ESM money that can be used for this purpose, but also provides for national government resources and resources from shareholders, creditors and even large depositors of banks. At the same time however there are more voices from across the Atlantic about the undercapitalisation of the European banks. Actually the Federal Deposit Insurance Corporation, Vice President, Thomas Hoenig said last week that the European banks are “hideously” undercapitalised and as an example he mentioned the ‘queen’ of the Eurozone lenders, the Deutsche Bank. If this one is undercapitalised only God knows what happens to the rest of them. In any case the Parliament has gone to the heart of this issue, and the leader of the ALDE group didn’t hesitate to point a finger to this direction. Most likely, the decision by the Ecofin’s group of experts to propose recapitalisation of banks directly from the ESM without the interference of governments is connected with what Verhofstadt said. Much talk no action Last but not least the EU Parliament cites the agreement on the seven-year EU proper budget as of prime importance for Europe. Hannes Swoboda, the Austrian leader of the S&D Parliamentary group, said: “EP cannot accept youth unemployment; therefore we need flexibility and revision clauses in this budget for it to work also in the future. A real budget must take the future into account.” In reality all those three issues that the Parliament set as priorities for the European Summit of 27-28 June are converging to one; more jobs for the young people. The Parliamentarians didn’t forget to hold the EU leaders responsible for talking a lot and doing almost nothing to really address the unemployment problem. “Decisions are taken but they are not being implemented and they are contested at home, in the member states,” said Joseph Daul, the French leader of the EPP group.