"It's up to Europe to set a global example of concertation"

What is most needed is concertation, cohesion and decision-taking at a global level. The European Union must set an example on the four topics that are high on the G20 agenda.

The banking sector’s toxic assets. This issue will only be solved by isolating them from the banks’ balance sheets. Massive loans are needed to buy these assets and public funds are also required for recapitalisation. The EU must be associated with national clean-ups because cross-border banking has created a transnational dimension and to apply the competition rules. I therefore strongly support the idea of a bond issuing EU stability fund (Gros and Micossi, Europe’s World, Spring 2009).

Eastern and Central Europe: An even deeper crisis in the new member states could have major consequences for all the EU. The proposal by Franz Nauschnigg of the Austrian National Bank for the eurozone to create a counter-cyclical facility and for the launch of an EU facility for balance of payments and macro-financial assistance, deserves serious examination.

Macro-economic coordination: A failure of global coordination is at the heart of the global imbalances, so what is now needed is a reallocation of demand from countries with current account deficits (mainly the U.S.) to those with structural surplus like China, Japan and Germany. And as the EU has a similar problem with France, Italy and Spain in deficit and Ireland or Greece at risk of insolvency. The EU therefore needs a political framework to enforce macro-economic discipline and tackle intra-European imbalances.

Regulatory reform: The de Larosière group’s proposals for allocating tasks and responsibilities in regulation and supervision between national and European levels should be fully adopted so as to become operative as soon as possible.

This crisis offers the EU a major opportunity to reinforce its institutions and to emerge all the stronger.