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Speech of President of the European Parliament to the European Council
of Heads of State and Government 

15 October 2008 - Brussels 

President of the European Council, Nicolas Sarkozy, 

Heads of State and Government,

President of the Commission, José Manuel Durão Barroso,

High Representative for the Common Foreign and Security Policy, Javier
Solana,

Ministers,

Ladies and gentlemen,

I. Crisis on the financial markets

A month ago the French Council Presidency convened a special summit of
the European Council because the crisis in Georgia was threatening the
stability of one of the pillars of the world order – international
law. 

Today a second pillar of the world order – global financial stability
– is under exceptional strain. The international financial markets are
faced with what is probably their greatest crisis since the Second World
War.

Even though the full extent of the crisis could scarcely be foreseen,
for some years now clear signs of serious shortcomings in the system had
nevertheless been discernible, shortcomings that meant that sooner or
later there would be serious problems. 

With the globalisation of financial trading, the money and financial
markets began to rely too heavily on a ‘laissez-faire’ approach and
self regulation. 

What all the events of the past few months have in common is significant
errors in market assessment and oversight. The regulation and
supervision of the financial markets have not kept pace with their rapid
development and regrouping, and as a result the markets have shown
themselves to be incapable of resisting financial crises.

The European Parliament has repeatedly pointed to shortcomings in the
regulation and oversight of the financial markets in the European Union
and also called on the European Commission on several occasions to
propose measures to strengthen the European oversight system.

As early as 2002 the European Parliament pointed out the deficiencies of
the regulatory framework for financial services and the related risks to
financial stability, as well as the inappropriate, risk- and
short-term-profit-oriented remuneration and the problems surrounding the
conduct of hedge funds. And in 2004 we drew attention to the
inadequacies – some of them very serious – in the work of the rating
agencies. In the current legislative period, we have renewed and
regularly taken up these themes and called for initiatives.

The Commission had committed itself, in the 2005 Framework Agreement on
relations between the European Parliament and the Commission, to
submitting legislative proposals in response to Parliament's demands, to
be accountable, and to give a detailed answer in each case.

Naturally, we are aware that a number of Member States were unwilling to
act. But now is not the time for apportioning blame; it is a time for
seeking common solutions. Our challenge today is to work together to
build confidence. In this difficult situation we should not forget the
successes we have achieved.

With the Euro as our single currency we are far better equipped than we
were in the past, each of us with our national currency. The European
Central Bank has also shown itself to be eminently capable of action in
the past few weeks: it has intervened almost daily to bring liquidity to
the market and in so doing has once again demonstrated that only
coordinated action can create confidence. 

The extent of this crisis reminds us afresh of how intertwined and
mutually-dependent our economies are. From the knowledge of our own
history and the great financial crises of the twentieth century we are
only too well aware of the drastic effects of going it alone and paying
too little attention to the cross-border effects of national decisions.

After the Second World War, precisely because of what we had learned
from it, international financial organisations were established and the
European Union was founded.

The lesson for us today must be this: isolated, uncoordinated national
action cannot produce solutions. Only joint responsibility can do that.
We need European solutions to the financial crisis in order for the
European Union to be equipped for a future of global competition.

xxx A determined, coordinated European response xxx

That is why the European Parliament very much welcomes the action plan
to ease the credit markets adopted at the extraordinary meeting of the
Heads of State and Government of the Eurogroup and the United Kingdom
last Sunday.

On behalf of the European Parliament, I should like to especially thank
European Council President Nicolas Sarkozy for his determination and
commitment in arriving at this package of urgent, mutually-agreed
measures. I should also like to offer Jean Claude Trichet, the President
of the European Central Bank, and Jean-Claude Juncker, the Chairman of
the Eurogroup, my thanks and appreciation for their efforts to achieve
coordinated action. 

I would like to expressly give recognition to the important role played
by the European Commission in this difficult time, in particular the
great commitment of José Manuel Durao Barroso. 

There was an urgent necessity to give the isolated efforts of individual
Member States a common European framework of action. 

Now it is the responsibility of you, the Heads of State and Government,
to decide today upon a binding, coordinated way of proceeding for all 27
Member States and to put this into practice rapidly – in accordance
with national needs – in all the Member States. On behalf of the
European Parliament, I recommend the adoption of the proposals of the
Eurogroup from Sunday in Paris. This will enable the European
Institutions and all the Member States to meet the enormous challenges
together, in solidarity.

It was with great surprise that we noted that the European Parliament,
unlike other Institutions, is not once referred to in the declaration
adopted at the Eurozone countries’ summit, even though many of the
legislative measures needing rapid adoption require co-decision or
assent on the part of the European Parliament.

These great challenges are also an opportunity for the European Union to
emerge stronger from the crisis through common action. We must speak
with one voice and act in solidarity.

xxx Short-term measures xxx

It is especially important in the short term that financial institutions
which are crucial to the system in the European Union be saved from
insolvency. This is essential for a functioning economy, for the
activities of European businesses and for employment, as well as to
protect individuals’ savings. 

People in the European Union expect reassurance from the European
Institutions. We therefore welcome the decision of the ECOFIN Council to
raise bank deposit guarantees for private individuals to at least €50
000.

What we have to do here is create a reliable system without further
distortions of competition within the European Union, without any new
threats to economic and financial circuits being posed by the flow of
savings deposits from one Member State to another. 

Let us not forget that this is not just a question of numbers, but of
the future prospects and savings of our fellow citizens. 

xxx Medium- and long-term measures xxx

In the medium term we, as joint legislators in the European Union, must
achieve a new organisation of the financial markets in Europe and
beyond. 

In addition we must ask ourselves what model we are seeking for the
financial markets in the European Union and worldwide. Does the idea of
self-regulating markets retain any credibility today? 

Freedom always goes hand in hand with order: the market principle must
not be equated with the unbridled forces of unregulated markets. We need
better rules and sustained oversight, a policy of order in the sense of
a Social Market Economy! The Social Market Economy is a European
economic and social model, as enshrined in law for the first time in the
Lisbon Treaty.

I believe that we are in agreement here: the answer to averting crises
more successfully in the future lies in greater transparency and
disclosure and better risk management. But these are not enough. 

We must carry out a comprehensive reform of the regulation and oversight
of the European financial services system. We need an appropriate,
uniform European framework in order to make the financial institutions
into responsible partners. 

For, if taxpayers’ money has to be massively used to rescue financial
institutions with injections of capital, then this should be accompanied
by clear demands regarding appropriate business management principles.

At the moment we have individual Commission proposals, but our aim must
be a coherent, comprehensive European response to the financial crisis.
The European Parliament is ready and determined to cooperate in this
work.

The proposal to rework the Own Funds Directive is a first step, but in
our view this is neither far-reaching nor wide-ranging enough.

The European Parliament believes that taking decisive action will
restore confidence in the responsible Commissioner. The European
Parliament has already submitted a comprehensive package of medium- and
long-term measures.

These comprise:

(1). regulation of all financial service providers, including hedge
funds, with a view to achieving greater transparency and more
responsible behaviour,

(2). binding risk-dependent own capital rules for all financial
entities,

(3). codes of conduct and scrutiny for rating agencies, with greater
disclosure of their evaluation criteria,

(4). the realignment of regulation of executive remunerations, which
should reflect profit and loss equally and should not be short-term risk
oriented in their effects, 

(5). improved transparency and good management in the application of the
balance sheet rules; this is very important for businesses.

In view of the cross-border character of banking and finance in the
European Union, we should agree without further delay on a common,
institutionalised approach to oversight of the financial institutions.
We must above all ensure that the 44 largest finance groups and
holdings, whose activities are important to the stability of the entire
financial system, are subject to Europe-wide oversight. 

It is a matter of great urgency that those who exercise financial
oversight should work in accordance with common rules and practise
effective networking of their activities. Our proposal would be to make
a college of the relevant oversight authorities responsible for
supervising the 44 institutions by the end of 2008. 

At the same time the Level-3 committees of the Lamfalussy Process should
be strengthened and mandated to act as the European supervisory system.
It is in any case important that the European Central Bank really be
incorporated into the future Europe wide oversight framework as well.

The European Parliament expects to be listened to more attentively and
to be fully involved in the design of the new oversight structures. The
European Parliament will continue to be cognisant of its responsibility
in this undertaking. Today, within 24 hours, we have accepted the
proposals of the Commission with regard to the fair values system.

xxx International solutions xxx

However, a comprehensive response to the crisis also calls for long-term
worldwide solutions. As soon as it has set the reform of its own rules
in train, the European Union should take the lead in pointing the way
towards a more comprehensive review of the rules to be applied to the
financial markets. 

II. Climate change and energy

Dealing with the crisis in the financial markets is extremely important.
But our planet too is moving in the direction of a catastrophic crisis
resulting from human errors of commission and omission. 

We must not repeat the mistakes that we made all over the world with
respect to the financial markets – failing to take countermeasures
early enough. 

Even though we shall only be able to measure the success of our actions
to combat climate change in the very long term, the time span left for
us to act is nevertheless very short – 7 to 8 years at most the
experts tell us – and in addition the price of inaction gets higher
with every day that passes. 

Prompt, decisive action to curb climate change and implementation of the
energy package must not be viewed as just a short-term economic burden
but, on the contrary, as a requirement of good long-term economic good
sense. 

Fighting climate change is also an economic opportunity and an
invaluable tool for reducing our energy dependency on Russia and other
third countries by diversifying and developing new technologies and for
gaining competitiveness in new markets through leadership in technology.


And it is, when all is said and done, also a moral obligation. Can we
allow our grandchildren to pay the high price of our failure to act?

We are sticking to our aim of achieving agreement on the energy package
by the end of this year, if possible. The European Parliament’s
Environment Committee adopted extremely important reports on the
reduction of CO2 emissions by clear majorities in the past weeks – on
the review of the Emissions Trading System, on carbon capture and
storage, and on efforts to reduce greenhouse gas emissions.

I should like to make it quite clear that this is not yet the position
of the European Parliament as a whole. All the Members of the European
Parliament are entitled to participate in these important decisions.

What is needed is a balanced approach which reconciles the interests of
the environment, climate protection and business. A common European
position is important now with a view to reaching an international
agreement that safeguards fair competition. If we should unfortunately
fail to conclude such an international agreement, then the question of
an economic burden on the European Union would arise again.

We very much hope that the Council will now submit proposals enabling an
acceptable compromise to be achieved in the context of the trialogue. 

It now depends on the Council whether there is enough flexibility to
allow us to reach agreement at first reading by December. 

III. Lisbon Treaty

Ladies and gentlemen, Heads of State and Government, you will be holding
intensive, detailed discussions today on possible European solutions to
the financial crisis, the challenge of climate change, practical
implementation of the solidarity needed in the energy sector and the
role of the European Union in Georgia. 

Today also the European Pact on Asylum and Immigration is due to be
discussed and adopted. On behalf of the European Parliament, I should
like to thank the French Presidency and you, Mr President-in-Office of
the European Council, for the successful work in this area.

All of these areas represent great challenges for the European Union.
There is a clear cost due to the fact that the Lisbon Treaty has not yet
come into force, and we feel its effects every day.

Tomorrow’s challenges turn all too quickly into today’s challenges
– and still we lack the tools that would allow us to meet these
challenges efficiently.

To date, twenty-four Member States have completed their parliamentary
ratification of the Lisbon Treaty. I would like once more to remind all
those countries that have signed the Treaty, but not yet fully ratified
it, of their responsibility.

In Ireland the government is currently seeking a way forward that
respects both the democratically arrived-at decision its citizens and
those 24 Member States that have spoken in favour of the Lisbon Treaty
in accordance with their constitutional arrangements.

An Taoiseach Brian Cowen will now be giving us his analysis of the
issues raised by his fellow citizens in Ireland and reporting on
developments in his country since the summit last June.

Taoiseach, you have declared your willingness to seek possible solutions
within an appropriate period of time. Against this background the
European Parliament welcomes the setting up of the new parliamentary
committee on the future of Ireland in the European Union which will -
under the chairmanship of Senator Paschal Donohue - be reporting by the
end of November on the steps to be taken following the no-vote in the
referendum.

On the basis of this report, we hope that you, Taoiseach Brian Cowen,
will be able to submit proposals on the issues to be settled and
possible solutions in time for the European Council in December at the
latest.

On this basis the December European Council should lay down a procedure
which will allow the Lisbon Treaty to come into force in the near
future. The European Parliament would welcome it if this could happen
before the European Parliament elections in June 2009. 

All the Member States and the European Institutions now have a great
responsibility to work with Ireland to find a solution acceptable to
all.

The great challenges we now face make the Lisbon Treaty, which will give
us a Europe that is capable of action, democratic and close to its
citizens, more necessary than ever.