Experts argued that, on the one hand, the dominant presence of foreign banks contributed to pre-crisis economic growth but, on the other hand, their policies and "aggressive behaviour" were also partly responsible for the build-up of “pre-crisis vulnerabilities” like the huge house price boom.
Initially the new EU member states were thought to have been hit harder by the crisis than the old ones. In fact, there is considerable variation within both groups, experts agreed at a workshop on the impact of the crisis on the new member states held on Monday by Parliament’s Special Committee on the Economic, Financial and Social Crisis (CRIS).
An important role in the crisis was played by foreign banks, which contributed to growth in the region, but also increased the vulnerability of these economies. European cohesion policy, as a major element of the crisis exit strategy, has helped the states in question to mitigate the repercussions of the crisis. But now the time has come to look to the long-term challenges.
Dominant presence of foreign banks
The role played by foreign banks in overcoming the crisis was important, said Mr Keeremans, while Mr Darvas argued that, on one hand, the dominant presence of foreign banks contributed to pre-crisis economic growth but, on the other hand, their policies and "aggressive behaviour" were also partly responsible for the build-up of “pre-crisis vulnerabilities” like the huge house price boom. Kateřina Šmídková believed the foreign western ownership of banks “does not seem to matter so much” as “all depends on the sound and credible macro-economic policies, the sound management of banks aware of systemic risks, and sound supervision”.
Danuta Maria HŰBNER (EPP, PL) quizzed the experts about current needs in terms of restructuring and recapitalisation of banks. In some countries, explained Filip Keeremans, banks received considerable help from governments. These banks now had to restructure and scale down their activities as "state aid can’t be used to expand or increase the market share”. But once “they repay the aid, they will be able to expand again,” he said.
In reply to Enikö GYŐRI (EPP, HU), who asked about the new financial regulations in preparation and the impact studies being conducted to model what will happen in these countries, Filip Keeremans promised that the Commission was aware of this “delicate question”. As the key measure in this respect, he stressed the need for banks to retain more capital. Kateřina Šmídková shared his view and added that she would not hesitate to increase capital requirements and that banks should be able to live with this. But again, the pre-condition was to have sound policies. “We didn’t pay enough attention in those countries to national supervision, whose role it is to reduce the risks,” she added.
EU 2020 Strategy
As regards the new, post-Lisbon Strategy which is being prepared, Péter Heil pointed out that at the beginning it “practically omitted” to mention cohesion policy. Furthermore, the budget review paper “cut it into pieces”.
“Can we afford this strategy which is territorially blind?” asked Danuta Maria HŰBNER. “It would be a great mistake,” replied Heil. “We don’t need some super policy imposed by Brussels” but one that is more focused or well-tailored.
For Fabian Zuleeg the key challenge in this respect was “not only to decide on what the objectives are, but on what the instruments are as well”. The EU needs to look beyond the current crisis, shift the focus to long-term sustainable growth and “resist the temptation to use cohesion instruments to deal with short-term issues,” urged Mr Zuleeg.
Further steps
The draft report by Special Committee rapporteur Pervenche Berès is to be presented on 20 May with the deadline for amendments set to expire at noon on 1 June.The adoption of the report by the CRIS Committee is scheduled for 13 July. The final report will be then be put to the vote by the European Parliament as a whole at its September II plenary session in Strasbourg.
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