It has become a permanent trend in the European Union to use any opportunity possible to enforce steps that limit member states’ powers and that delegate the decision process onto the European level. An exemplary example of this approach has been the EU’s reaction to the financial and economic crisis. Pro-EU politicians cannot have passed up this opportunity.
Even though the current financial and economic crisis broke out in the US, and it has deeper economic causes that no bureaucratic regulators in the world were able to deal with in time (and it is disputable whether any regulation could deal with them), the main result of the fight against the crisis at the European level has been the emphasis on further regulation and on the creation of a new model of European financial supervision adopted on the basis of the so-called de Larosière report.
Attack on national economic policy
This new regulatory system should consist of two brand new global institutions – European Systemic Risk Board (ESRB) and European System of Financial Supervisors (ESFS). The first institution should be developing macroeconomic analyses and on their basis reveal potential risks that are threatening the economic and financial stability of EU markets. It should give recommendations to member states to adopt appropriate measures, and to evaluate implementation of these recommendations in individual countries. ESFS should, on the contrary, take over powers (or part of them) from member countries’ financial market regulators, to supervise financial market at the European level and provide legal acts that will be binding for national regulators. However, the mandate and legal standing of these new institutions are not clearly set and that leaves many essential questions unanswered.
If this project is accepted in its current form, it will lead to the weakening of member states’ national bodies not only in the area of financial market supervision, but also in the economic policy as a whole. Standpoints and recommendations issued and declared by the ESRB will in fact mean implicit subordination of member states’ economic policies to the European centre and that entirely outside of the current contract basis, including the unratified Lisbon Treaty. These recommendations will present powerful pressure on member states’ governments and central banks, which will be further reflected in the attitudes and expectations of financial markets and investors. Impact on member states will be very debatable.
Centralisation – behind the back of all laws
If I abstract away from the ability (or rather inability) of regulators to rationally and effectively do all this within the whole European continent and also from the disputability of their motivation, the delegation itself of the supervising power over the financial market to the European level without at the same time transferring the responsibility for the consequences and costs of these decisions, is unacceptable in principle as it threatens the ability of member states’ authorities to accept responsibility for their economic policy. One can therefore rightfully assume that this so-called new model of the European financial supervision secretly aims to enforce centralisation of economic policies of member states behind the backs of their executive and legislative bodies, outside of contracts, the European Council and European Parliament.
The Czech National Bank has taken a very critical stance toward this project and has pointed out many unacceptable risks. The course of the financial crisis has shown how disadvantageous it can be for member states to be subordinate in decision making when national institutions are not responsible to anyone. Prevention against crisis does not lie in European centralisation but mainly in preferably unlimited functioning of markets, as well as in order and professionalism of the national authorities who are responsible for the situation on the financial market.
The author is the president of the Czech Republic
