24 January 2017

Speech by the President of the Eurogroup, Jeroen Dijsselbloem, at The Future of Europe event

[...]In Europe we had to save many banks at a huge price. And we failed in the first years to recapitalize and clean up their balance sheets. But after the government leaders decided to create the Banking Union, mid 2012, we designed its structure and negotiated its authority in record period of time.

Only two years after this decision, at the end of 2014, the Banking Union was set in motion with the Asset Quality Review, a thorough check of the financial health of the balance sheets of the major banks. Many banks have since then been restructured and recapitalized, a process which is still continuing. Also, the legacy problems in Italian banks are being dealt with; finally some would say.

Solutions will have to be found within the setup of the Banking Union. A lot of attention is given, also in the media, to Banca Monte dei Paschi di Siena (MPS) but at the same time other banks are in the process of being restructured or recapitalized through private solutions. Unicredit, Italy's largest bank, much larger than MPS, is currently in the process of raising approximately 13 billion euro amongst private investors. In the case of MPS a solution should and will be be found in case of possible mis-selling of bank bonds to certain retail customers.

So, to sum up:

1. All member states that needed financial help during the crisis - perhaps except one - are now standing on their own legs again.
2. The fiscal situation throughout the Eurozone has improved.
3. And the Banking Union has helped stabilizing and further strengthening the financial sector. 

So it is fair to say the Eurozone has left the crisis behind. Still, the apocalyptic stories about the euro remain unchanged. I'd like to address three reasons for that. 

First, as mentioned in the introductions, the political situation in this election year. Second - Brexit and its consequences. Third, inevitably the start of president Trump last week.  [...]

My point is: where many may expect or fear a turn to the (far) right, the outcome of all these elections is unknown and could be, again, quite moderate. My best guess is that at the end of this year Germany, France and the Netherlands will still be governed by mainstream, sensible politicians. Then will also be a good moment to push ahead on a number of topics regarding the future of the EU and the Eurozone. [...]

The exit itself is already complex and costly, the future arrangement will be even more. In my mind it is inevitable that we will need a transition period to avoid a  disruptive process, equally damaging to both sides. Two topics have my special attention in the proces.

The first is the relationship between the City as the largest financial center in Europe, and the EU rules and regulations, standards and supervisors for the financial sector. It is unthinkable that the EU will allow UK based financial institutions full access to do business in the internal market without a sustainable coupling of future (dynamic) UK standards to the EU framework. At the same time I realize that, given the promise of full sovereignty, this will be a hard truth to accept for the British.

Secondly, we need to talk about taxes. We have made a lot of progress in pushing back tax avoidance in the last couple of years. 
The UK has played an active part in this. Yet, the work on this topic is far from finished.

In all of our countries - and the British are no exception - the people demand fair taxation, also for multinationals. And the only way to achieve this, is by far reaching international cooperation. The question now is, whether the UK will go the Trump-way or continue to work closely with its European partners. We have heard threats of going rogue and creating an offshore tax haven, just of the coast of Europe.
That would be a huge mistake. And it would certainly stand in the way of a fair trade deal that would suit us both.

Besides these possible pitfalls - and there are many more - I think the Brexit can also have a positive effect on continental Europe. I hope the Brexit will actually trigger a process of strengthening the EU. As chair of the Eurogroup I believe we should start a dialogue between all EU countries - including the non-euro member states - about stronger future relations and further integration, also for the monetary union.

[...]The new Trump administration is another reason to rethink our position. The transatlantic relations are shifting. In many ways. Geopolitical issues, defense and security, tax issues, the future of international financial institutions, and off course trade are now surrounded by question- and exclamation marks. Trump challenges Europe in many ways.

I think we have to accept the fact that we will have to take our fate in our own hands. No use watching and waiting for what will come from across the Atlantic. We're on our own. And we need to deliver.

The EU needs to provide security and economic perspectives. Trust in both has been hampered in the years behind us. The EU was part of the disappointment, for many people in Europe. From a historic perspective, the EU is still a major success and a huge accomplishment. Yet it was build taking giant steps and a lot of risks.[...]

Full speech

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