Repair and redesign of the financial system
The financial system is an evident case in point of the need to revise our policy approach. The crisis has led to a thorough reassessment of the rationality and resilience of modern financial markets, and their ability to mitigate and control risk. In order to save and repair the global financial system, and to reduce the risk of a repeat of such a crisis, policy makers have to act decisively, on all fronts and in a globally co-ordinated manner.
Against this benchmark, the Commission has also redesigned the supervisory structure in the EU:
· the three new European Supervisory Authorities, overseeing supervision of banks, insurers and securities markets, will help overcoming segmentation and inconsistencies between national supervisors and enhance the overall quality of supervision;
· the European Systemic Risk Board (ESRB) will widen our scope of oversight to the nexus of macroeconomic and financial markets trends at large and be ready to spot and deter the build up of excessive risk at an early stage.
All these changes to regulation and supervision have been closely co-ordinated with the G20 partners, most recently in Seoul 10 days ago. The measures, taken or planned, will foster financial stability in Europe.
The state of the global economy
Another factor that is set to weigh on growth prospects in the short to medium term is the fiscal consolidation phase that most Member States embark on in order to put the fiscal situation on a sustainable footing. However, despite some inevitable short-run pains, it is essential that fiscal sustainability will be secured with ambitious and detailed plans of medium-term adjustment, complemented by short-term consolidation efforts, and appropriately differentiated across countries. Starting to put the fiscal house in order will not push us back into a double-dip recession - on the contrary, it is the failure to consolidate public finances that could jeopardize the on-going recovery.
© European Commission
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