Interview with MEP Sharon Bowles (ALDE, UK), chair of ECON committee
“I’ve long been a fond proposer of eurobills”
By Sarah Collins | Thursday 05 July 2012
Sharon Bowles, head of the European Parliament’s Committee on Economic and Monetary Affairs (ECON), talks toEuropolitics
about the crisis and the future of the eurozone.
Is it now end game in the eurozone crisis? Will we find a lasting solution or continue to muddle through?
I think if we get it wrong, everything could fall apart, that is true, but I think if we keep a cool head and apply logic then there are ways in which it would work. That’s why we’re trying to put together the long term and the short term. The point about the long term, and in particular things like deposit guarantees, is to try to stop things like bank runs because whenever you have nervousness in a banking system, you bring it down, even if it’s perfectly sound. Just a rumour can bring down a bank and we should all remember that. But when you actually try to do it, of course, you get bogged down in detail - most deposit guarantee schemes are overdrawn so at the moment it’s sovereigns standing behind them, which is why I think you need something that bridges between now - when it’s hard to get to mutualised guarantee schemes - and the future.
There is a ten-year plan in the making for closer banking, budgetary and political integration in the eurozone, Is this ~distracting us from the immediate crisis?
I think we are seriously underplaying what’s already been done, especially in the field of economic governance. Every time there’s another little glitch in the merry-go-round of problems, we have another summit and everybody says we’ve got to have tighter this and tighter that and tighter governance, which makes it sound as if we haven’t done anything.
Do we need stricter budgetary controls in the eurozone?
If you look at the ‘six pack’ [of economic governance rules], what is in there is incredibly intrusive, it’s as strict and as intrusive as an IMF programme. The only difference is you haven’t got the IMF coming in to inspect you, but in terms of what you have to do, what you have to show, it’s every bit as steep, and we haven’t sold that to anybody. If you go and ask analysts in the City of London what’s happened, they haven’t a clue - ‘six pack’ means nothing to them. Because it’s incomprehensible, it’s failed to sink in in that very important part of the financial markets. And it’s not proven until somebody doesn’t do it and sanctions, or throwing them to the wolves, or whatever it is that happens as a consequence, happens.
What is the solution?
I’ve long been a fond proposer of eurobills
(1), the short-term debt that rolls over. There is a proposal around [from the European League for Economic Cooperation] that suggests a four-year programme. Something like that fits very nicely with the period of time needed to prove the ‘six pack’, ‘two pack’ and various other proposals. This four-year bill idea would give a period of stability to prove - or not, as the case may be - that everybody will stick to the rules and that the rules work. It’s an opportunity for a beginner’s bond to take to the floor. If we are to get to the utopia of complete fiscal union with full eurobonds, you need to have some kind of highlight on the way.
But your political group, ALDE, has been agitating for a 25-year debt redemption fund - it’s one of the suggestions in the ECON reports on the ‘two pack’.
Yes, the MEPs like it very much and as a theoretical fix, I think it works very well, but I’ve just been thinking to myself, I’m Angela Merkel, trying to put this to a referendum, and I’m saying to the people, ‘Give me your guarantees, lend me your money for 30 years’. How many of us would put our hands on our hearts and say we’d buy that? Whereas look at the t-bill proposal - it’s four years, there’s actually a way to kick people out at the halfway stage if they don’t comply, you can tie it into the European Stability Mechanism and the European Central Bank and other mechanisms that we’ve already got, and if it all goes horribly wrong at least it’s for a smaller commitment.
What about banking union? The Commission says it will table proposals this year.
Certainly you need proposals to be brought forward to cope with changes in who the supervisors are. If you have the ECB becoming the supervisor for the eurozone, you do need to make some consequential changes to the European Banking Authority because you’d still need that as a strong body for dealing with the 27. There are things you need to do to reinforce the role for resolution, but we could do quite a lot with the proposals that are already there, though they’re very controversial in many member states. For deposit guarantees, I think you can have a layer where everybody is in while we’re using industry money but if you have a mega-crisis and need to touch the sovereign purse, then it would have to break off, and at that level the backstops for the eurozone could be the European Stability Mechanism or the ECB and for the euro ‘outs’ it would be based around their national sovereign arrangements. Most of what’s in this we wrote two years ago when we were doing the EBA [regulation]. In fact, the review of that regulation is now happening, so that would be the vehicle, I would have thought, through which the Commission might want to introduce anything else.
What about breaking the bank-sovereign link - will the new proposals do that?
You need to dispense with the fiction that you can break the bank-sovereign link at the moment. You can never break it completely because when all’s said and done, we can’t live without banks and if there is a mega event the sovereign has to step in. We’re just trying to put lots more hurdles in the way before you ever get to that position, but you can never remove it.(1) Common issuance of debt with maturity of less than one year among eurozone members