EU Commission: The banks are not obliged to finance the real economy

Press conference by Michel Barnier, Member of the European Commission, on the adoption of a follow-up Communication to the Green Paper on the Long-term financing of the European economy. (EC Audiovisual Services, 27/3/2014).

Press conference by Michel Barnier, Member of the European Commission, on the adoption of a follow-up Communication to the Green Paper on the Long-term financing of the European economy. (EC Audiovisual Services, 27/3/2014).

At a time when the Eurozone banks have received for free €4.5 trillion of taxpayers’ money and at least another €3 trillion from the ECB at close to zero interest rates, the Commission dares to ask the pension funds and the Internet to replace the banks in financing economic growth in the crisis stricken and now stagnating euro area. This seems to be the case with the Commission’s initiative for a “roadmap to meet the long-term financing needs of the European economy”, which was announced yesterday by three of its key members, Barnier, Rehn and Tajani.

Internal Market and Services Commissioner Michel Barnier, Olli Rehn, EC Vice-President for Economic and Monetary Affairs and the Euro and Vice-President for Industry and Entrepreneurship Antonio Tajani, joined forces yesterday to launch an initiative meant to put at risk Eurozone’s pension funds and mobilise charity through the Internet, in order to replace bank credits to long-term projects and the SMEs. The idea is to reduce the role of the occupational funds in securing old age pensions for small employers and self-employed workers and at the same time create the spectacle of doing things in favour of the small and medium businesses. Let’s take one thing at a time.

New burden for pensioners

Starting from the pension funds, one should not forget that they have been the main victims of the financial crisis of the last five years. All over Europe the pension funds paid the dearest price for the US credit crunch and the EU sovereign bond fallout. Bankruptcies of banks and governments hit primarily the pension funds despite the fact that their financial investments contained practically no risk elements, consisting mainly of bank deposits and sovereign bonds. Now the commission wants to further undermine the position of the occupational pension funds in the financial constellation of the Eurozone, by reducing their importance in the wider pension business.

The obvious target is to make room for increased intrusion of the banks in this financial sector. The relevant Commission document (European Commission – MEMO/14/239 27/03/2014) states that “Employers, including SMEs, are expected to benefit through the reduced cost of joining an existing occupational pension fund”. Understandably, if the small employer wants a more substantial superannuation scheme he can turn to a bank/insurance company for a ‘life product’.

It’s not only that though; the Commission also wants that the pensioners’ money is used to replace the banks in their duty towards the society as long-term creditors of the economy. The idea is to let the banks alone to ‘digest’ the trillions they have received for free, and mobilise the occupational funds in order to cover the gap in the long-term financing of the economy. To this effect, the same Commission document mentioned above also states that, “Provisions on investment restrictions would be modernised (as explained above) so that Member States could not restrict investment choices made by occupational pension funds (in particular in assets with a long-term profile such as infrastructure) if restrictions were not justified on prudential grounds”.

Charity for the SMEs

Last but not least, the idea of the Commission to issue a communication on crowdfunding to offer alternative financing options for SMEs (MEMO/14/240) is at least a bad public relations project. In this respect, the Commission wants to relieve the banks from their duty to finance the SMEs. The truth is that only the SMEs depend on the lenders for their financing. The large business groups and the multinationals can finance themselves directly from the capital markets and the private equity funds. In short, the only sector that really needs the banks for its credits, the SMEs, is now encouraged to directly tap the savings of the households through crowdfunding, touching the region of charity.

Once more the target is to leave the banks at ease to ‘digest’ the trillions they have received for free. In reality, the banks do not want to mix themselves any more with the financial needs of the largest part of the population. Indirectly this Commission initiative degrades the activity of SMEs financing to charity.

All in all, those two Commission initiatives are a straight recognition that the banks cannot or don’t want to play their role as the creditors of the largest part of the business sector that is the SMEs. The burden of two very important financial activities, real economy’s long-term financing and the credit to SMEs, are swiftly transferred to the civil society. The banks are left at ease to bet other people’s money to all and every market of the world. It becomes plain then that the banks are no more responsible as financiers of the real economy in most crucial sectors, long term projects and the SMEs.

 

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

5 creative alternatives to plastic packaging

UN chief condemns student abductions in north-west Cameroon

How the gender commuting gap could be harming women’s careers

These 11 companies are leading the way to a circular economy

Here’s how we get businesses to harmonize on climate change

A Sting Exclusive: “Regional Policy: a fully-fledged investment policy”, Commissioner Cretu reveals live from European Business Summit 2015

How the mobile industry is driving climate progress on the scale of a major economy

These countries are leading the way in green finance

Movius @ MWC14: Discussing novel Communications Applications over a “CAFÉ”

International Day of the Midwife: 5 things you should know

UN Security Council welcomes results of Mali’s presidential elections

UNICEF warns of ‘lost generation’ of Rohingya youth, one year after Myanmar exodus

Residents and visitors to this Dutch neighborhood could share a pool of cars and bikes

Rising insecurity in Central Africa Republic threatens wider region, Security Council told

Medical education during COVID-19 pandemic

Horn of Africa: UN chief welcomes Djibouti agreement between Eritrea, Ethiopia and Somalia

Trump’s withdrawal from the Paris climate deal is bad for US business. Here’s why.

Mental distress during the pandemic: is there a way out?

Social, cultural diversity ‘an enormous richness, not a threat’ Guterres declares calling on investment for a harmonious future

Commission reaches agreement with collaborative economy platforms to publish key data on tourism accommodation

European Commission presents comprehensive approach for the modernisation of the World Trade Organisation

Migration crisis, a human crisis after all

EU consumers will soon be able to defend their rights collectively

A Sting Exclusive: “Climate Change needs to be demystified”, Anneli Jättenmäki Vice President of European Parliament underscores from Brussels

Commission statement on the European Remembrance Day for Victims of Terrorism

Ηealth’s foundation is falling apart: what can we do about it?

MWC19 Wrap Up, in association with The European Sting, GSMA’s Brussels Media Partner for the 6th Consecutive Year

Does hosting a World Cup make economic sense?

Cyprus tragedy reveals Eurozone’s arbitrary functioning

5 inventions that could transform the health of our ocean

Yemen: ‘A great first step’ UN declares as aid team accesses grain silo which can feed millions

It’s time to end our ‘separate but unequal’ approach to mental health

Education remains an impossible dream for many refugees and migrants

iSting: Change Europe with your Writing

Now doctors can manipulate genetics to modify babies, is it ethical?

One more country to test the EU project: Kaczynski’s Poland

4 ways leaders are driving innovation in the public sector and revolutionising governance

10 of Albert Einstein’s best quotes

Will Boris Johnson’s victory lead to a no-deal Brexit or is there still time?

How 2020 taught businesses to place empathy before profit

Coronavirus COVID-19 wipes $50 billion off global exports in February alone, as IMF pledges support for vulnerable nations

Korea should improve the quality of employment for older workers

These companies can recycle nearly anything, from cigarette butts to fax machines

Cancer research put at risk by General Data Protection Regulation? The possible dangers of a data privacy EU mania

75 years after Auschwitz liberation, antisemitism still threatens ‘foundations of democratic societies’

This new form of currency could transform the way we see money

The Japanese have a word to help them be less wasteful – ‘mottainai’

Look no hands: self-driving vehicles’ public trust problem

Why Eurozone can afford spending for growth

Lack of involvement, or lack of opportunities?

3 reasons why responsibly-deployed technology is key to the COVID recovery

As Saudi women take the wheel, UN chief hopes end of driving ban creates more opportunities for kingdom’s women and girls

This is what the world’s CEOs think about the global outlook

EU Budget 2019: no deal before the end of the conciliation period

Sudan Partnership Conference: EU mobilises more support for Sudan’s transition

MWC 2016 LIVE: T-Mobile US reveals 5G trial plans

Parliament cuts own spending to facilitate agreement on EU budget

Foreign Affairs Council (Trade) of 22/05/2018: EU relations with key trading partners

EU mobilises €21 million to support Palestine refugees via the UN Relief and Works Agency

These photos show some of the world’s smallest things massively magnified

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s