Eurocommissaris Kroes: financiële en economische stabiliteit noodzakelijk voor de toekomst van Europa (en)

Neelie Kroes i

European Commissioner for Competition Policy

The urgent need for leadership

Address at High-Level Conference on Industrial Competitiveness

Brussels, 17^th March 2009

Ladies and gentlemen,

The next year or two will be messy and hard – debates like this will help us through it.

I believe Europe already has the medium- and long-term policy settings right: an efficient Single Market that fosters equality of opportunities rather than outcomes.

This is what has delivered us the most prosperity for the longest period of time in Europe's history.

We also have relatively strong welfare states, so automatic stabilizers will help cushion some of the pains that a recession will bring.

But we have much work ahead of us, and I understand why an outsider may look at the European system and wonder if our institutions are up to the task or even if, as Professor Krugman wrote in yesterday's New York Times, are "A continent adrift".

I don’t think we are adrift.

We have solid foundations but a complicated situation and 27 governments to negotiate.

It is tempting to sometimes envy systems where much power is concentrated in fewer hands.

But we do not get out of this crisis by dreaming about systems we do not have.

So, as regards the policies that I control as European Commissioner for Competition, I want to make three points that:

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  The first is that we must avoid falling into the trap of trying to solve the problems by "beggar thy neighbour" strategies. So far we have delivered that through sticking with the system of economic good governance that EU state aid control constitutes.
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  The second is that we need to be ready to take drastic measures to repair the damage to our financial systems. We've avoided meltdown, but that is not enough.
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  The third is that flexible and competitive markets are crucial both on the way into a recession and to get out of it. So we aren't going soft on competition.

We are all in the same boat

The economic crisis is truly global.

This will be the first time since World War II that world economy as a whole is shrinking.

We have to find solutions that take this into account.

When things are tough, it is tempting to try to steal economic activity from your neighbours, either by protectionism, defensive state aid or devaluations of your currency.

But the solution is not to have "buy American" or "buy European" or "buy Spanish" clauses in our laws.

Offering that road is the opposite of leadership, and we have to fight those temptations vigorously.

Sometimes temporary protectionism is suggested but protectionism is addictive and history tells us the only temporary part is the commitment to repeal it.

Whether you look at recent examples such as the 1974 Multi Fibre Agreement (MFA) which lasted 30 years instead of the planned 10 – or French protectionism after the end of the Napoleonic Wars which lasted even longer, it all points to a pattern.

Protectionism never does what it says on the label:

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  It lasts longer than claimed
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  It backfires in the end
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  It hurts the poorest countries and vulnerable people most.

Aside from the lessons of the 1930s about what happens when we build walls between our economies, for Europe it would simply be madness to throw away the current benefits of our Single Market.

To exchange decades of peace and prosperity for nothing more than the chance to fund a few loud, politically connected companies, would be the definition of tragedy.

We would be propping up structurally inefficient companies, then leaving our children and grandchildren to foot the bill.

I think we've caused enough trouble for them already.

We need to fix the banks

Next stop is fixing the banks by clearing their balance sheets.

What, specifically, is meant by that?

We have avoided financial meltdown, but that is not enough. We now need to ensure financial and economic stability for the future.

To make full use of the schemes and avoid zombie banks we must fully identify and correctly value the impaired assets on bank books.

Half-transparency and half-solutions won't help.

This means banks will have to share all of the information about their impaired and toxic assets if they want the public purse to be available to them.

With that information – and only with that information - we can decide how to restructure or wind down the banks.

Some banks may be too big to fail, but they are not too big to restructure.

Clearing the books in this way will give the survivors the best chance of a healthy future.

This is the clearest path to stability in the sector, more lending to the real economy and a return to economic growth.

I have spent the last three months meeting with bank CEOs from all over the world; every one of them says that their bank is sound, but that it's everyone else that is in trouble.

I worry that some banks are still in denial.

If it takes some tough love to make them face up to their responsibilities, then that's what I am prepared to offer.

If more banks had feared their regulators pre-2008 we might be in a better place now.

Of course these words are the easy part – but the actions are responsibilities we have to face as leaders.

That leadership isn't coming from many in the corporate sector right now, so expect much of the burden to fall on the public sector.

Competitive markets make recovery easier

As we enter deeper into the recession, our citizens grow impatient.

They want quick-fixes that don't exist.

Competitive markets are by definition hard work but they offer the best chance of the best recovery.

Europe needs modern industries not museum industries - and museum industries are what you get if you insulate them from market signals.

We need to have open access to the markets, so that those who see the opportunities in the midst of the crisis can grow and deliver the jobs that we need to get out of it.

Conclusion

In conclusion, expect 2009 to be messy and hard.

There aren't any perfect solutions and utopian institutions waiting for us to stumble upon them.

But through 50 years of increasing prosperity, and the successful avoidance of the subsidy wars and financial meltdown that loomed upon us in 2008 we know that competition policy is part of the solution, rather than part of our current problems.

The important thing to remember is that the European Commission believes in markets – it just doesn't think leaving them on autopilot is good enough – and that runs through everything that we do.