02 March 2008

FT: Barroso warns on protectionist pressures

Protectionist pressures are increasing across Europe, even among political forces traditionally committed to free markets, according to José Manuel Barroso, the European Commission president. In an interview with the Financial Times, Mr Barroso also explicitly ruled out creating a single pan-European regulator in response to the turmoil that has plagued financial markets since August.

Mr Barroso was speaking two weeks before a summit of European Union leaders that is expected to address the instability of financial markets, to propose a code of conduct for sovereign wealth funds and to advance the EU’s energy and climate change policies.

Asked if protectionist sentiment was growing in the EU, Mr Barroso, a committed advocate of free trade, said: “Yes, and I fear this rise not only in Europe but all over. Political forces in Europe that were traditionally pro-market are today – let’s put it elegantly – more prudent. Some on the centre-right are now more conservative in that regard.”

 “I know very well that some people think of China’s growth as a threat. We want to make it an opportunity,” he said. “I have told the Chinese: ‘You have to help us, you have to make the case that it’s good for the global economy’. ”

He said he saw some progress in China’s position on the defence of intellectual property rights – a key concern for European companies. “The Commission doesn’t want to, but it might be hard to resist the protectionist calls,” he warned.

On the EU’s response to the financial markets turbulence, Mr Barroso gave strong support to Germany, the UK and other countries that oppose French and Italian calls for a pan-European regulator. “We certainly have no intention at all of having some kind of European super-regulator. But we want increased transparency and more co-operation among regulators.

“We think innovation in financial markets is good. It’s been good for financial institutions, business and consumers. But financial innovation and the incredibly sophisticated products on offer created regulatory gaps. Those gaps have to be addressed, and addressed pragmatically. A hasty response would do more harm than good.”

He reinforced previous Brussels warnings of possible regulatory action to tighten procedures at credit ratings agencies, saying: “We think that there were failures at the ratings agencies. They should improve their standards so that the market can regain confidence in their work.”

Mr Barroso said the US economic slowdown was taking a certain toll on Europe. “Of course, we cannot be completely immune to the situation in America, but we think there is no rational reason to fear a recession in Europe,” he said.

“It’s true that from time to time EU member-states are tempted by reform fatigue but, at different speeds and in different forms, economic reform is still the name of the game.”

He praised the new member states from central and eastern Europe, saying: “They have brought additional pressure for more competition in the older EU states. We are showing that enlargement can be a win-win process for the EU.”

By Lionel Barber and Tony Barber in Brussels

© FT plc