I was asked to chair a debate about whether the Eurozone
crisis was behind us last week, as per President Francois Hollande’s recent
“The euro crisis, I've
said it before, is behind us. We've given Greece the funds it was waiting for.
In Spain we've helped keep the banks afloat. In Italy, even if there's
political uncertainty, I'm sure the Italians will address it.”
I’m sure President Hollande is correct – after all, Hollande
now rules France, and is that not truly European? – in terms of the Eurozone
crisis is behind us as a crisis event.
The instability of the Eurozone countries; the debate about the PIIGS
(Portugal, Ireland, Italy, Greece and Spain); and the sovereign debt concerns;
the credit rating cuts; and more are all over.
They are not yet sorted out but, as a crisis issue, the
storm of worry is over.
This is because the Merkel and ECB actions have proven that,
whatever it takes, Germany will not allow the Eurozone to fall apart.
Whatever it takes.
This is because, in the words of one panellist last week, “Germany
needs the Eurozone more than the Eurozone needs Germany”.
The pervasive view being that Germany’s economy would
unravel as surely as the Eurozone if the currency broke apart as, a little like
the currency issues Switzerland has faced, the strength of the Deutsche Mark
would destroy Germany’s economy.
I’m not sure that this is true, but the crisis as an event
is probably over. The crisis as a
progressive evolution of Europe is not.
Another panellist brought out the old nugget that Europe is
moving a little like America and you have to bear in mind that America was not unified
a century ago.
You only need to watch the Oscar-winning film Lincoln to know this.
America was divided between North and South and, truth be
told, the country is still divided between North and South.
America is comprised of 50 United States, but they are not
homogenous. They have their own tax and governmental
structures and run as a federated union, rather than a singular nation.
This is what many envision Europe becoming, with Greece
being the Florida to Germany’s New York, (does that make Spain the Arizona to Britain’s
California, or something like that?).
The counter argument, as usual, is that Europe is nothing
like America. We have many member states
– 27 today – but they all have long histories with their own integral cultures,
languages, structures and nuances, which cannot be integrated or federated.
And yet, federated is exactly what Europe is becoming, with
the Banking Union being the first step towards a Federal Europe structure.
That is the process of evolution we are undergoing, and is
why Britain is so resistant to the European march of change, as the last thing Britain
wants is to be absorbed into a Federal Europe.
This is why we talk about a three-stream Europe where there
is a Eurozone, a European Union state and an Extended Economic Area, with some
of the current EU states having to decide whether they join the centre of move
to the outside.
Maybe you cannot have these member states acting as
piggy-in-the-middle. Maybe they cannot
sit on the fence. Maybe, just maybe, countries
like Sweden, Denmark, Britain, Poland and Hungary need to start making decisions
as to whether they are centre-Europe or fringe-Europe, as you cannot really be
middling Europe (or is that muddling?).
This has been the source of a rich vein of humour in the
recent revival of Yes, Prime Minister here
in the UK, where the current premier has to grapple with the rich Oil State of
Kumranistan offering trillions of dollars of subsidies to Europe as long as
Britain joins the euro.
At one point, the Prime Minister’s aid states that: “we
cannot govern Europe without joining the euro.”
Prime Minister Jim Hacker, played by the excellent character
actor David Haigh, replies: “Why not? We governed India without joining the
That’s kind of the mentiality of the British gentry I guess,
and you can catch more of the new series on Gold as we speak:
Certainly, the British are far more disruptive and sceptical
about Europe’s prospects than most nations, driven by the media at both the
mainstream and the highbrow. Even then,
it does not help when countries such as France admit to being bankrupt just as their leadership is trying to quell such rumours, many of which were
fuelled by created by The Economist’s late November issue that dissected the country’s prospects in a dire
The threat of the
euro’s collapse has abated for the moment, but putting the single currency
right will involve years of pain. The pressure for reform and budget cuts is
fiercest in Greece, Portugal, Spain and Italy, which all saw mass strikes and
clashes with police this week (see article). But ahead looms a bigger problem
that could dwarf any of these: France.
The country has always
been at the heart of the euro, as of the European Union. President François
Mitterrand argued for the single currency because he hoped to bolster French
influence in an EU that would otherwise fall under the sway of a unified
Germany. France has gained from the euro: it is borrowing at record low rates
and has avoided the troubles of the Mediterranean. Yet even before May, when
François Hollande became the country’s first Socialist president since
Mitterrand, France had ceded leadership in the euro crisis to Germany. And now
its economy looks increasingly vulnerable as well.
The real outcome of both the media debate and our
discussions are yet to be seen, but it is clear that three things are
The first is CONFIDENCE. Confidence is needed for the Eurozone to
continue and succeed, and the Eurozone has that confidence back. Germany has seen to that and, as per SWIFT’s traffic
reports, you have to bear in mind that 43% of all SWIFT messages are in euro’s
and that the euro is currently the second most commonly held reserve currency
behind the dollar, comprising approximately a quarter of allocated holdings.
The second is TRUST. European
nations have to start trusting their integration and dependencies and stop
fighting against the tide of union that started back in 1992 with the
Maastricht Treaty (or 1958 under the Treaty of Rome if you prefer).
That trust is incredibly hard when you have buffoons like
Silvio Berlusconi threatening to get back into office. Bear in mind that this was the idiot who
referred to Angela Merkel as ‘culona
inchiavabile’ on the record. That does not help trust.
The third is PROCESS. Europe is not a product or service, but a
process of development of nations into a unified region. That process has been underway for decades and
no matter what the short-term loss of confidence and trust has been in that
process, that process is still underway.
This is demonstrated easily by everything from SEPA to EMIR, and the
regulatory regime that is bringing Europe together economically, monetarily and
The process continues, whether you like it or not, so Europe
is a regional economy that is harmonising and who knows, in a hundred years or
more, could be like a United States of Europe.
Meanwhile, in a final note of humour, I did finish my
chairing of the conference with this joke:
Commission has just announced an agreement whereby English will be the official
language of the EU rather than German which was the other possibility.
As part of the
negotiations, Her Majesty's Government conceded that English spelling had some
room for improvement and has accepted a five year phase-in plan that would be
known as "Euro-English".
In the first year,
"s" will replace the soft "c". Sertainly, this will make
the sivil servants jump with joy. The hard "c" will be dropped in
favour of the "k". This should klear up konfusion and keyboards kan
have 1 less letter.
There will be growing
publik enthusiasm in the sekond year, when the troublesome "ph" will
be replaced with "f". This will make words like "fotograf"
In the 3rd year,
publik akseptanse of the new spelling kan be ekspekted to reach the stage where
more komplikated changes are possible. Governments will enkorage the removal of
double letters, which have always ben a deterent to akurate speling. Also, al
wil agre that the horible mes of the silent "e"s in the language is
disgraseful, and they should go away.
By the fourth year,
peopl wil be reseptiv to steps such as replasing "th" with
"z" and "w" with "v". During ze fifz year, ze
unesesary "o" kan be dropd from vords kontaining "ou" and
similar changes vud of kors be aplid to ozer kombinations of leters.
After zis fifz yer, ve
vil hav a reli sensibl riten styl. Zer vil be no mor trubl or difikultis and
evrivun vil find it ezi to understand ech ozer. Ze drem vil finali kum tru! And
Only to read the day after our debate that Joachim Gauck,
Germany’s President, has called for English to be made the language of the
I suppose as English is the only language that is common to
all – Angela Merkel communicates with Francois Hollande in English as neither
speak each other’s first language – that makes sense, but it does also seem
that truth is sometimes stranger than friction.
Ah well, roll on the Union.
If you are into this stuff, we have two debates about Europe
coming up at the London Financial Services Club.
happening and does it matter?"
Our annual debate
Wandhofer, Head of Market Policy and Strategy, EMEA, Global Transaction Services,
Manning, Head of EMEA Payment Solutions, Transaction Services, International
Banking, the Royal Bank of Scotland
Bailey, Director, Logica
Miller, Managing Director, Blacksmith Consulting
Started in 2002, in response to the Lisbon Agenda and
Regulations on fees for cross-border cash withdrawals, the Single Euro Payment
Area (SEPA) has been in the planning for a long time. In fact, it has been discussed for so long by
so many that, for a lot of people, it’s become as dull as dishwater. This view may be wrong though as, after seven
years of gestation, SEPA Direct Debits (SDDs) were finally born in November
2009 and the Payment Services Directive (PSD), which legally supports SDDs, was
transposed and implemented in most European countries. So all is good is it not? With twelve months to go until the end-date
hits us it was recently noted by Deutsche Bank that 68% of credit transfers and
98% of direct debits are yet to migrate, whilst 90% of corporates are yet to have
their first seminar with their banks to discuss the SEPA project!
Things are not quite right.
To find out the truth, the Financial Services Club has
gathered Europe’s most preeminent commentators and activists in the SEPA
discussion to provide insight and understanding in our regular, annual debate.
“The future for
Europe and the Euro: whither Europe?”
Grzegorz Kolodko is one of the world's leading authorities on economics and
development policy and a key architect of Poland's successful economic reforms.
He is the author of nearly 40 books published in 23 languages, with his most
successful work to date being Truth,
Errors and Lies: Politics and Economics in a Volatile World, where
Professor Kolodko applies his far-reaching knowledge to the past and future of
the world economy, introducing a framework for understanding our global
situation that transcends any single discipline or paradigm. Well known journalist and commentator, Andrew
Ziemski, said about Kolodko's book that is was of the same stature as “Alvin Toffler's `Future Shock', published
in 1970, and Francis Fukuyama's 1989 `The End of History'. The whole civilized
world talked about them. This book will play a similar role.”
Bishop will provide a response to Professor Kolodko’s speech. Graham Bishop was a member of the European Commission's
Consultative Group on the Impact of the Euro on Capital Markets (the Giovannini
Group). He was a Member of the Commission's Strategy Group on Financial
Services responsible for creating the Financial Services Action Plan, and the
Committee of Independent Experts on the preparation of the changeover to the
single currency. He was nominated by the
European Parliament to be one of its two members of the first
Inter-Institutional Monitoring Group, as foreseen by the Lamfalussy Report, and
was Rapporteur for the spring 2003 and November 2004 Reports. Since 2005 he has
been on the Board of the Kangaroo Group and re-elected in 2007, 2009 and 2011.
We also have a Clearing & Settlement Working Group
(CAS-WG) meeting on 14th March that will debate more on the
specifics of how the regulatory changes at the EU level affect our clearing and
If you want to attend any of these sessions, just register http://www.fsclub.co.uk/events.cfm