REPORT OF THE JOINT COMMITTEE
ON FINANCE, PUBLIC EXPENDITURE AND REFORM
ATTENDANCE
COMMITTEES
AT THE
OF
MEETING
PARLIAMENTS
18-19 SEPTEMBER 2011
DECEMBER 2011
OF
OF
CHAIRPERSONS
EU MEMBER
OF
STATES,
FINANCE
WARSAW,
TABLE OF CONTENTS
PAGE
Introduction
4
Opening Address by Mr. Jerzy Wenderlich,
Vice-Marshal Polish Sejm, and Mr. Pawel Arndt,
Chair of the Sejm Public Finance Committee
5
Session I-Challenges and Prospects of European
Economic Governance (Mr. Jacek Rostowski, Polish Minister of Finance) 6
Conference Debate-Contributions from Delegates
9
Session II-Sources of Growth in the European Union,
(Professor Witold Orlowski, Member of the Economic Council
to the Prime Minister and Professor. Dariusz Rosati,
Warsaw School of Economics
11
Conference Debate-Contributions from Delegates
14
Session III-Financial Supervision: Lessons Learned from the Crisis
(Mr. Stanislaw Kluza, Chair of the Polish Finnacial Supervisory
Authority)
15
Conference Debate- Contributions from Delegates
17
Conference Summary and Valediction Speech
18
2
Appendices
Appendix A: Membership of the Joint Committee on Finance, Public
Expenditure and Reform.
Appendix B: Press Release-Polish Presidency of the
Parliamentary Dimension, Meeting of Chairpersons
Committees, Warsaw, 18-19 September 2011
EU
of
Council,
Finance
Appendix C: List of Participants, Meeting of Chairpersons of Finance
Committees of Parliaments of EU Member States, Warsaw, 18-19
September 2011
Appendix D: Family Photo, Meeting of Chairpersons of Finance
Committees of Parliaments of EU Member States, Warsaw, 18-19
September 2011
3
Introduction:
The Chairpersons of Finance Committees of national parliaments met in Warsaw
on 18/19 September 2011.
The meeting was arranged under the auspices of the Polish EU Presidency. The
conference focused on three key topics; (1) Challenges and Prospects of
European Economic Governance, (2) Sources of Growth in the European Union
and (3) Financial Supervision: Lessons Learned from the Crisis. The meeting took
the form of a number of presentations and panel discussions each addressing the
subjects in a particular manner. This report outlines the principal issues raised.
The Joint Committee on Finance, Public Expenditure and Reform was represented
by Deputy Alex White, (Chairman), who was accompanied by Mr. Eoin Hartnett,
Junior Clerk.
4
Opening address by Mr. Jerzy Wenderlich, Vice-Marshal of the
Polish Sejm and Mr. Pawel Arndt, Chair of the Sejm Public Finance
Committee
Mr. Wenderlich welcomed the visiting delegates participating in the conference.
His address centred on the need to co-ordinate economic policy at a european
level. Innovation and globalisation had transformed the international financial
system and the risks associated with this development can only be faced through
enhanced policy co-ordination. He noted recent developments in this regard,
referring specifically to EU governance proposals and the introduction of the
European Semester with its increased role in monitoring and evaluating national
budgetary policy. Mr. Wenderlich pointed to the enhanced powers afforded to
national parliaments under the Lisbon Treaty and asked parliamentarians to
embrace these powers in strenthening the EU law-making process. The impact of
national parliaments would be critical in dealing with the ongoing implementation
of various rescue programmes and ultimately would help restore european
prosperity through increased competitiveness.
Mr. Pawel Arndt, Chair of the Public Finance Committee of the Polish Sejm, also
supported closer european economic integration. Adjusting macro-economic
imbalances and adhering to the strict limits enshrined in the excessive deficit
procedure provided a good platform to economic recovery. Various proposals
including sanctions for non-compliance with budgetary targets might incentivise
reform but success depends on our human determination to reduce debt and
maintain sound public finances. Mr. Arndt alluded to the establishment of the
European Systemic Risk Board and three financial supervisory authorities. The
objective of these bodies is to minimise systemic risk to the functioning of the
euro. For the euro to survive, there must be uniform governance. The EU must
embark on a process of reform. Reducing the debt burden should be coordinated
at EU level and Mr. Arndt confirmed that the Polish government was actively
involved in this process.
5
Session 1-Challenges and prospects of European economic governance
(Mr. Jacek Rostowski, Polish Minister of Finance)
Mr. Rostowski welcomed delegates to the conference. He acknowledged the
turbulent days we live in and stated that the public confidence crisis in the euro
area had the potential to become a worldwide crisis. The crisis is a direct threat
to both the euro and the EU itself. Failure to overcome it will undoubtedly lead to
destructive consequences for all member states. He referred to the informal
Ecofin meeting in Nice in September 2008 where tentative proposals on
developing an EU system of financial supervision were mooted. The basis for
creating such a framework was to bridge existing loopholes that prevented
effective cooperation between national supervisory authorities. Hungary was the
first country to propose this body and Poland seconded the idea.
Considerable progress had been achieved since the Nice Council meeting. The EU
had established three supervisory bodies to monitor the banking, insurance and
derivatives markets. The European Systemic Risk Board will ensure in future that
any asset bubbles will be contained and will not endanger the real economy. Mr.
Rostowski reflected that the early pessimism doubting the ability of the EU to
institute change had been disproved. Moreover, the worldwide stress tests that
assessed banks for extreme circumstances has in general demonstrated that
banks are safe. Some institutions will require some level of recapitalisation but
this process will invariably strengthen the overall banking sector.
Mr. Rostowski proceeded to discuss the six-pack governance system agreed the
previous Friday in Wroclaw, Poland. Poland was very proud to host the presidency
during the adoption of this measure. The six-pack represent the foundation for
the system of economic governance within the EU. The existing governance
arrangements are weak in several respects. The excessive deficit procedure fails
to adequately take account of levels of public debt. The six pack has addressed
this anomaly. In future, members states will not be permitted to exceed a public
debt ratio of 60% to GDP. The institutionalisation of fiscal rules is another
important step. Poland, for example, has fiscal rules written into its constitution
and such legal requirements have proved helpful and effective in maintaining
fiscal prudence.
Mr. Rostowski outlined the key aspects of the six pack legislative package. The
first pillar refers to rules involving the debt to GDP ratio. General deficits shall not
6
exceed 1% in the medium term and some member states should target a 0%
deficit. Recommendations, in future, can be issued by the Council and
Commission. Failure to comply with stated recommendations will result in
monetary fines. Part one primarily exists as a new “preventive arm” to limit fiscal
deterioration.
The second element of the package refers to the opinions of the European Council
and Commission. Mr. Rostowski stated that both bodies would utilise a
“checkboard of indicators” to monitor emerging warning signs. Where these are
located, the European Council of Systemic Risk and the Commission will issue an
alert to Member states. Mr. Rostowski heralded this development as “a huge step
forward in EU governance” adding that it would lend a higher degree of integrity
to EU macro and fiscal supervision.
In addition, the six-pack represents a breakthrough, in that, it is the first time
that states have reached agreement on the structural elements of budgets. To
date, the emphasis has been on balancing budgets. Now, the focus is on spurring
GDP growth through a number of structural reforms. Mr. Rostowski deemed
structural reforms as indispensable in securing public finances. This would involve
eliminating
barriers
to
entrepreneurship
and
greater
investment
in
the
employment and innovation spheres.
The euro sovereign debt crisis had escalated in recent times and these new
supervisory tools were necessary to provide a robust support framework. Mr.
Rostowski recited the main provisions agreed at the European Council summit on
21 July. These included: improving the stability of the EFSF through increased
funding; increased flexibility in the use of the funds and the establishment of the
European Stability Mechanism (ESM) in 2013 to act as a permanent replacement
for the EFSF. Mr. Rostowski stressed the importance of national parliaments
approving the 21 July package. Otherwise, the financial turmoil seen in markets
in August “will seem minor” to what may occur if the package is not
implemented. In sum, Mr. Rostowski requested that states show the appropriate
level of solidarity and responsibility. He acknowledged that solidarity was not a
handout but also reminded delegates that the consequences of state insolvency
for the banking system “was too awful to contemplate”. In this respect, Mr.
Rostowski supported the recent intervention of the Swiss central bank to supply
liquidity when the Swiss francs appreciation was threatening to undermine the
7
Swiss export sector. The EU had to apply the same approach when the euro was
under attack.
Mr. Rostowski emphasised the global nature of the eurozone crisis when he
referred to the attendance of US Treasury Secretary, Timothy Geither, at recent
high-level european discussions. He noted the added significance of the coordinated responses from five central banks to intervene and inject liquidity into
the financial system. The central banks of Switzerland, Japan, the United
Kingdom in tandem with the ECB and the Federal Reserve had displayed the unity
of purpose necessary to resolve a global situation. Mirroring this initiative
offerered the EU a template to tackle intra-EU difficulties. Any response will
require solidarity and certainity of responsibility and enhanced integration. Mr.
Rostowski argued that the means of closer integration should not create a gap
between countries within the eurozone and those states outside.
Mr. Rostowski’s closing remarks focused on “where we are” at present. He raised
concerns that the prevailing fears concerning sovereign public finances was
leading to uncertainity and risk aversion practices amongst entrepreneurs.
Investors were not willing to lend finance until certainty about the future of the
euro was confirmed. However, he congratulated the ECB on its robust
intervention
in
treasury
markets
in
August
2011.
Mr.
Rostowski
stated
unequivocally that intervening in the Spanish and Italian treasury markets had
effectively saved the euro. Moreover, the intervention had provided a “window“ to
construct initiatives to replace emergency intervention. Mr. Rostowski concluded
his presentation with a warning that Europe has “a limited period of time” and
states should use this window of opportunity to achieve a comprehensive solution
to the sovereign debt crisis.
8
Conference Debate-Contribution from Delegates
Mr. Teodor Dumitru Stolojan (Vice-Chair of the European Parliament
Committee on Economic and Monetary Affairs): thanked the Polish Sejm for
hosting the conference at this particular juncture. Commenting on the recent
agreement at Wroclaw on the “six pack” legislative package, Mr. Stolojan said the
European Parliament would approve the agreement at its next plenary session in
Strasbourg. He said the difficulty lay in the application of sanctions for breach of
terms and that the European Parliament and Council differed in this respect. He
advocated a “good compromise” which would allow for implementation of the
agreed measures. Furthermore, he hoped that the new agreement would replace
the Stability and Growth pact, insofar as, member states had not respected the
previous
rules.
Solidarity
amongst
member
states
is
a
prerequisite
but
responsibilty must accompany it. He acknowledged that markets were scrutinising
developments and full disclosure of the magnitude of losses in public finances was
essential to move forward.
Mr. Gunter Stummvoll (Austria): congratulated the Polish presidency for its
efforts in securing agreement in Wroclaw the previous Friday. The consequences
of a eurozone break-up for Austria would be severe. He estimated losses in
excess of €40 million. He likened economic policy to a triangle where different
sides mimicked the varied responses required. Thus, whilst deleveraging is
important, it must be supplemented by growth. Without growth, there will be no
recovery.
Mr.
Stummvoll
said
it
was
time
to
move
from
rhetoric
to
implementation but countenenced that members states should employ a welldesigned communications strategy to inform and convince their electorate.
Mr. Mario Baldassarri (Italy): attributed global macroeconomic imbalances as
the source of the current crisis. Overspending in the United States coupled with
excessive Chinese savings had led to a false economy with the artificial
appreciaton of the renminbi further exacerbating the distortion. Mr. Baldassarri
requested new global architecture to combat the crisis. The G20 was not the
answer. Instead, Europe should pursue a course of further integration with new
fiscal infrastructure.
9
Mr. Eduardo Cabrita (Portugal): said delegates should view the crisis in a
global context. The very existence of the euro and the EU project is at stake. He
argued for greater policy co-ordination at EU level to generate common responses
to the crisis. However, he felt that the pursuit of economic growth had been
neglected in the austerity drive. Generating growth will be a critical tool in
eliminating public debt and should receive priority attention.
Mr. Lutfi Elvan (Turkey): bemoaned the lack of co-ordination of economic and
fiscal policies at EU level. The absence of co-ordination creates competition
problems and ultimately results in some states having to rescue others. It was
vital that a centrally managed authority oversees the financial path of the wider
EU.
Responding to contributions, Mr. Rostowski said Europe should concentrate on its
own challenges. Imbalances in the global economy exist vis a vis the US and
China but the EU should address the challenges on its own doorstep first. He
reminded delegates “we are where we are” and argued that regulations needed to
be strengthened and improved. The EFSF should be bolstered in terms of its
financial firepower. Poland is willing to contribute to the EFSF. Referring to the
funding arrangement for Ireland, Mr. Rostowski deemed the terms too onorous.
He argued for an extension in the length of repayment. The current conditions, he
believed, are counter productive and actually inhibit growth. Finally, he criticised
the piecemeal policy response to the crisis to date. At each stage the EU leaders
had intervened in a periodic fashion providing the minimum requirement. The
monies allocated were too little and too late. Instead, it is the European Central
Bank (ECB) that has the deepest pockets and should take the lead in putting in
sufficient capital from the outset.
10
Session II- Sources of Growth in the European Union (Prof. Witold
Orlowski, Member of the Economic Council to the Prime Minister and
Prof. Dariusz Rosati, Warsaw School of Economics)
Professor Orlowski opened his address with an historical overview of global
economic development. He demonstrated the historical tendency along an axis
entitled North America versus the South Pacific. However, the advance of
globalisation and development of financial markets has led to a profound shift in
the global economic paradigm. Professor Orlowski stated bluntly that Europe “is
going to lose ground” and that this process cannot be halted. China will continue
to grow faster in the years ahead and Europe should prepare for this eventuality.
He said that the world of finance had moved away from the real economy and the
process of deleveraging underway in Europe will take years to complete.
Inevitably, this process will result in very slow economic growth. He further
added that the EU strategy to exit the crisis had been a failure and that Europe
had betted on the US administration to devise a solution. While the quantative
easing mechanism had generated some growth, it was due to cease shortly and
there was no alternative replacement programme.
Professor Orlowski blamed Europe’s tepid response to the crisis on its obsession
with the United States. He cited Germany as an example. Germany’s focus, he
said, throughout the crisis had been on its exports to the US. Yet, Germany
exports much more products to other european states. The current EU problems
arose from a lack of decision-making throughout the previous two years.
Eventually, market participants have lost patience with the lack of action and
vision. However, the problem is not about money. Professor Orlowski stated that
the financial stability of the euro area is adequate. The key deficit lies in
leadership and the failure to measure the consequences of integration.
The answer to current failings is to promote entrepreneurship. Europe is a mosiac
of countries that continues to operate separately. The visionary ideas enunciated
in the Single Market Act have not been fulfilled. Barriers continue to exist. The EU
will require a co-ordinated economic policy framework together with a common
currency to overcome this crisis.
Professor Rosati’s presentaton focused on raising long-term growth potential in
the EU. He identified that the basic problem in the EU was structural. The fault
11
lies in the specific european socio-economic model that results in sluggish
growth. This model encapsulates high taxes and high social security provision. In
addition, the future demographic trends forecasted for the EU represent another
negative. There are also global imbalances. Principally, China is providing loans to
the United States and the EU is paying for these loans. In effect, the United
States is exporting its problems to Europe.
To counter this situation, Europe must regain manoeuvrability. This will entail
creating a new vision for growth supported and prompted by decisive leadership.
The EU must re-define its growth model and decide which activities provide real
value. In Professor Rosati’s opinion, the EU should concentrate its resources in
high-value products that will accrue substantial returns from the export sector.
He believes some high financial services will survive into the future but the sector
will not provide employment for the 500 million EU citizens. Moreover, there is a
cultural problem in relation to european employment. Many europeans have
shunned the entreprenurial and hi-tech sectors in favour of public sector
employment.
According to Professor Rosati, the essence of the future employment landscape is
knowledge, work and entrepreneurship. The previous Lisbon strategy had failed
to achieve the dynamic economy it intended to. The new EU2020 strategy
contains many of the errors that hampered the Lisbon strategy. In adopting
EU2020, we “didn’t analyse the weaknesses of Lisbon”. The EU continues to lack
the instruments in implementing key market reforms. This is primarily due to the
concentration of competence in the hands of national governments. Only a
common co-ordinated authority can institute the necessary change; otherwise,
the absence of ownership will prevail. Professor Rosati regretted that he failed to
see the EU2020 strategy as remedying the failures of its predecessor. Unpopular
decisions like raising the employment age will require strong political will.
Whether this will exists is doubtful.
Professor Rosati proceeded to outline the growth path he would like to see
implemented by EU leaders. In his view, European structural reforms should
follow a different path to the policies pursued over the previous thirty years.
Emphasis should be placed, above all, on productivity and growth. Such a course
would involve reskilling, investment in research and development and a
commitment to introduce innovation into production.
Small
and medium
enterprises should receive addiational aids. Too much attention is afforded to
12
large companies. Better regulation with increased flexibility and a reduction in
“red tape” would help nurture burdgeoning enterprises and spur growth.
There are several immediate actions that can assist development. Firstly, the
single market needs to be completed through the elimination of remaining trade
barriers. The single market accounts for 70% of jobs and two-thirds of GDP in the
EU. Additional improvements could yield benefits of 1-1.5% in GDP growth.
Amongst others, these include: liberalisation of the services market; the opening
of network industries to promote the full integration and liberalisation of Gas,
Energy, and Transport networks; the completion of the digitilisation of trade flows
and the removal of fixed barriers, especially, indirect taxes. This would require
eliminating individual cost bases and establishing a single taxation base across
Europe. Professor Rosati estimated the net growth potential arising from
instituting these reforms would exceed 10% of GDP with little or no investment
costs involved.
On economic governance, Professor Rosati demanded tougher sanctions to
maintain fiscal discipline. He noted that no EU state has ever received fines for
breaking excessive debt rules. The proposed excessive public debt procedure
announced as part of the “six-pack” legislative package should be fastracked.
Sanctions and fines must be invoked when states fail to comply with the 60%
debt/GDP ceiling. Structural reforms should also extend to the demographic
sphere. The pensionable age must be adjusted upwardly and both Sweden and
Denmark are the standard bearers for this revision. Reforms of the financial
supervisory architecture within the EU are welcome, if a little late.
The failure to grasp the extent of the crisis by EU leaders has led to the current
crisis of confidence. International markets have lost faith and now believe Spain
and Italy are in a crisis. Confidence must be restored. Solving the Greek crisis is
of paramount importance. With an estimated debt to GDP ratio of 125%, “nobody
believes Greece can pay back this debt”. All solvent countries must be separated
from Greece to demonstrate Greece’s individual plight. But the key institution
with the ability to resolve the crisis is the European Central Bank (ECB). National
governments niether have the ability nor the resources to inspire confidence in
the markes. Only the ECB has the necessary facilities. Greek banks will require
significant assistance to prevent a Greek default and the inevitable recession that
will follow. Summarising his paper, Professor Rosati re-iterated that the old
european econmic model is outdated and inadequate. Recovery will depend on
13
implementing a pragmatic new agenda that places work and knowledge at its
core. Before economic policies bear fruit, the EU must initiate political solutions to
resolve the most pressing issue-the Greek Sovereign debt crisis.
Conference Debate-Contribution from Delegates
Dr. Norbert Walter-Borjans (Germany): stated that the passive attitude of
member states had to stop. Europe was confronting a catastrophe and a new
approach was necessary. It was important to return to forces within the real
economy. He disagreed that production is the preserve of the Chinese. The EU
must and can compete internationally in industry. Germany had proved this true
with sizeable economic growth to date in 2011. The EU had considerable
advantages in the knowledge sciences and “we should use all the potential at our
disposal”. Dr. Walter-Borjans said it was unrealistic to think that growth can be
achieved without a functioning financial sector. Once the difficulties in the
banking sector were addressed and a financial transaction tax was introduced,
growth would emerge from these interventions.
Mr. Mario Baldassarri (Italy): worried that the levels of interest payable on top
of the principal sums of European debt would weigh heavily on EU states for
years to come. The EU may indeed achieve financial stability but at what price?
The expenditure involved in servicing debt may lessen any gains made and leave
Europe adrift in the International economy.
Mr. Theodor Dumitru Stolojan (MEP): rejected the idea that states were the
main actors in the global economy. Companies fulfilled this role and states should
support these entities through better regulation and reducing administrative
burden. He referred to the importance of international standards and questioned
the wisdom of introducing a financial transactions tax if other countries refused to
do so. The consequences, in terms of comparative advantage, may result in a
isolated Europe.
Mr. Goran Petterson (Sweden): stated Eurpe has enormous potential but
chooses not to use it.The mindset is fixed so that competition is perceived as
negative and to be feared. With more self-confidence, Europe can attain greater
success. Germany’s success in competing against China was one such example.
Mr. Petterson thought the EU should review its financing strategy. Monies
14
distributed to regions and invested in uncompetitive sectors must be reallocated
to research and development.
15
Session III- Financial Supervision: Lessons Learned from the Crisis (Mr.
Stanislaw Kluza, Chair of the Polish Financial Supervisory Authority)
Mr. Kluza commenced his presentation with a warning that the financial crisis
was far from over. Markets remained volatile and this would continue for the
forseeable future. He began to dissect the crisis “through the eyes of a financial
supervisor”. In his assessment, Mr Kluza argued that there was a cost whether
regulation was imposed or not. The G20 had estimated that the financial crisis
had resulted in a 3.7% reduction of GDP in 2008. The role of the financial sector
is to value the risk. Over-regulation kills but a lack of regulation also has
significant downsides. He welcomed the EU proposals preparing for enhanced
financial supervision coordination on a wider european level. The complexity of
financial markets had made it more difficult to eliminate risks but the EU was
correct to institute these reforms and would benefit in time.
Mr. Kluza said it was easy to attribute all the problems emanating from
management level but this was an over-simplification. Frequently, financial sector
problems had local roots at local levels. Also, risks accompanying the functioning
of financial sectors vary from country to country. The EU is not homogenous in
this respect. Therefore, it was good for the EU to define minimum standards to be
observed across the board. Mr. Kluza argued that local supervisory authorities
should retain some powers. This is especially true regarding capital buffers and
liquidity
management
where
“local
facts”
play
an
important
role.
Local
supervisors should show care in monitoring financial activities and should pay
particular attention to averages as they could be informative. Because large
financial institutions operated as market makers and potentially discharged
greater risks, these institutions should be liable and should bear costs.
In his closing remarks, Mr. Kluza stated that supervisors should strive to obtain
political independence. Supervisors should be forthcoming in specifying the risks
at large. Importantly, the “rules of the game” should be transparent and the
same for all market participants. Transparency means the application of equal
rules. Finally, Mr. Kluza stated that financial stability is a public good and the
benefit arising can be measured. Risks can also be analysed. States have a choice
in how they approach risk. They can either contest and supervise or alternatively
turn away.
16
Conference Debate-Contribution from Delegates
Mr. Goran Petterson (Sweden): revealed that Sweden has a large financial
sector relative to its overall economy. Following advice from both the Commission
and the International Monetary Fund (IMF), minimum capital ratios and
maxminum requirements had been introduced. Mr. Petterson asked Mr. Kluza to
comment on this approach and assess whether it was the correct way to proceed.
Mr Stanislaw Kluza: replied that it was good to have minimimum requirements.
Minimum requirements should also be supplemented with capital buffers and
liquidity add-on’s. However, this should be done at local level. Indeed, one of the
key EU principles-subsidarity-acknowledged the importance attached to local
conditions. Mr. Kluza said that each country would have individual experiences
and that responses should be tailored to match these individual circumstances.
17
Conference Summary and Valediction Speech
Mr. Pawel Arndt, Chair of the Sejm Public Finance Committee, summarised the
conference proceedings. He acknowledged the current economic difficulties
experienced by member states throughout the EU. The consequences of the
financial crisis had translated into a struggle for many citizens. He revealed his
satisfaction that solidarity remained a recurrent theme throughout all of the
conference discussions. He appealed for greater confidence among european
leaders when tackling the eurozone crisis. Initial steps towards greater coordination in multiple spheres is a positive development and should produce
results. Finally, he thanked the delegates for their attendance and the open and
frank exchange of views. He expressed his hope that all the problems discussed
during the conference will be resolved and strengthened by the shared
experience.
18
Appendix A:
JOINT COMMITTEE ON FINANCE, PUBLIC EXPENDITURE
AND REFORM
List of Members:
Chairman:
Alex White, (LAB)
Deputies:
Richard Boyd-Barrett, (IND)
Michael Creed, (FG)
Jim Daly, (FG)
Pearse Doherty, (SF)
Stephen Donnelly, (IND)
Timmy Dooley, (FF)*
Sean Fleming, (FF)
Joe Higgins, (IND)
Heather Humphreys, (FG)
Kevin Humphreys, (LAB)
Peter Mathews, (FG)
Mary Lou McDonald, (SF)
Michael McNamara (LAB)*
Michael McGrath, (FF)
Olivia Mitchell, (FG)
Jonathan O’ Brien, (SF)
Kieran O’ Donnell, (FG)
Arthur Spring, (LAB)
Billy Timmins, (FG)
Liam Twomey, (FG) (Vice-Chair)
Senators:
Sean D Barrett (IND)
Thomas Byrne (FF)
Michael D’Arcy (FG)
Aideen Hayden (LAB)
Tom Sheahan (FG)
Katherine Zappone (IND)
Notes:
1. Deputies appointed to the Committee by order of the Dáil on 9 June 2011
2. Senators appointed to the Committee by order of the Seanad on 16 June
2011
3. *Deputy Timmy Dooley appointed on 21 June 2011 in place of Deputy
Seán O’ Fearghaíl
4. Deputy Alex White elected as Chairman on 23 June 2011
5. Deputy Liam Twomey elected as Vice Chairperson on 23 June 2011
6. Deputy Michael McNamara appointed on 8 December 2011 in place of
Deputy Thomas P. Broughan
19
Appendix B: Press Release
18 - 19.09.2011, Warsaw
Meeting of Chairpersons of Finance Committees
III SESSION
19th September 2011, at 14.15 am
Financial supervision: lessons learned from the crisis
- This is the time for prevention, some kind of foresight, so that similar crises or similar
events in future were more moderate or did not occur at all, said the Chairman of the
Polish Financial Supervision Authority Stanisław Kluza, opening the third session of the
conference of the Chairs of the Finance Committees. The former Minister of Finance
presented conclusions drawn from the crisis from the perspective of the financial market
supervision.
The Chairman of the PFSA stressed that maintaining an appropriate balance of legal
regulations is necessary to avoid recession. - One of the financial sector’s roles is to assess
the risk, but also buy, sell and trade in that risk. New supervision architecture should take
those elements into account: excessive regulation is destructive, but its lack results in the
costs
that
we
see
today,
he
summed
up.
Stanisław Kluza also spoke about the role of the European dimension of the financial
market supervision. – Three sector agencies were established, as well as a board at the
European Central Bank. The level of coordination, as well as cooperation between the
countries, is definitely necessary, said Stanisław Kluza. He believes that elimination of the
crisis from one country will be futile and the complexity of financial markets requires
coordinated
activities
of
all
countries.
The Chairman reminded that each crisis had its local roots. Therefore, each local supervisor
should have vast possibilities in terms of local risk assessment. - Each country is at a
different level of economic development (...), which means that risks related to the
functioning of the financial sector also vary in individual countries, he explained.
Therefore, he believes that minimum criteria should be specified to serve as a standard for
each
country
in
order
to
avoid
regulatory
arbitrage.
- Creation of good, equal and competitive rules of the game for individual financial
institutions is one of the most important and essential issues we should work on now, said
the Chairman. He stressed that we should be particularly sensitive to the problem of moral
hazard on the part of large financial institutions, since the mitigation of this phenomenon
will
guarantee
security
on
financial
markets.
- What should supervision look like? asked Stanisław Kluza. The models of supervision based
on risk assessment and analysis are necessary for the appropriate functioning of the
financial supervision. He emphasized that supervision should be independent politically and
from the financial sector. He added that elimination of redundant bureaucracy was the
necessary
condition
for
appropriate
functioning
of
the
supervision.
Summing up the conference, the Chair of the Public Finance Committee of the Sejm Paweł
Arndt highlighted the importance of solidarity between all countries, which is necessary to
prevent the crises. – We agree that the way out of the crisis is to strengthen coordination
and cooperation in the economic policy. The views presented in the discussion point to the
necessity to restore confidence in the European Union and the common currency and to
achieve recovery in the entire Europe, he declared. Paweł Arndt thanked the participants
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and expressed his hope that the meeting was an important element of building the climate
of cooperation and trust.
II SESSION
19 th September 2011, at 11.00 am
Experts at the COFIN conference on sources of economic growth in the EU
How can Europe begin to grow at a satisfactory rate again? was the question which the
experts participating in the 2nd session of the meeting of the Chairpersons of the Finance
Committees of the EU Member States’ parliaments tried to answer. The sources of
economic growth in the European Union were discussed by Professor Witold Orłowski, a
member of the Economic Council to the Prime Minister, and Professor Dariusz Rosati from
the Institute of Foreign Trade Policy of the Warsaw School of Economics. The conference
was co-organised by the Sejm and Senate under the parliamentary dimension of the Polish
Presidency.
Professor Witold Orłowski stated that the economic growth in Europe had not been up to
expectations for at least 20-25 years. Contrary to projections, single market, common
currency or the EU enlargement failed to generate the dynamics recorded in the 1950s or
1960s.
The member of the Economic Council to the Prime Minister discussed the challenges faced
by Europe which functions in the world where the global distribution of economic power
changes. He compared the region of the Northern Atlantic and the Southern Pacific which
together generate over 80% of the global GDP. Professor Orłowski presented how the
system has changed over the centuries. According to his forecasts, the proportions will be
reversed again. - In the next decades, we will see a shift of production and added value to
the Southern Pacific, believes Professor Orłowski. He stated, however, that this did not
mean the decline of Europe, but a faster growth of China and India. He believes that each
crisis
will
accelerate
the
shift
of
the
world
production
centre.
Professor Witold Orłowski stated that the current financial crisis was caused by the fact
that the world of finance lost touch with the real economy. He expects the coming years to
be marked by a relatively slow growth. - Extensive structural reforms are undoubtedly
necessary, for example in the financial sector, he emphasized, adding that risk could not
be eliminated but could be more efficiently controlled by means of better regulation. The
member of the Economic Council to the Prime Minister also discussed the crisis recovery
strategy adopted by the United States and the approach of Europe to this issue.
- Europe cannot “waste” this crisis, stressed Professor Witold Orłowski, explaining that it
was necessary to draw conclusions from the crisis. - The way out is to make progress and
deepen integration, (...) even if it goes beyond the safe limits of purely economic
integration,
he
argued.
According to the Professor, a new vision of development is needed and Europe should think
about its sustainable grounds. Witold Orłowski declared that the main foundations for
competitiveness had to be strengthened (human capital, knowledge, modern
infrastructure), innovation stimulated and the spirit of entrepreneurship ignited. The
member of the Economic Council to the Prime Minister also pointed to the importance of
streamlining the market functioning in the entire EU, removing obstacles between the EU
countries and sector, improving coordination and cooperation in the field of economic
policy
and
stabilizing
the
euro.
Professor Dariusz Rosati from the Institute of Foreign Trade Policy of the Warsaw School of
Economics drew attention to a structural phenomenon, consisting in the fact that after a
period of fast growth in the 1950s-1960s Europe failed to caught up with the United States.
According to him, the main reason behind the slowdown is the specific European social and
21
economic model, characterised by a large share of the state, a relatively high level of
taxation
and
a
wide
scope
of
social
services.
- Europe needs profound structural reforms which would preserve the values of our
European social model (...) and at the same time modernise it so that the instruments to
accomplish the objectives were different than applied as part of the policy in individual
countries
during
the
last
30-40
years,
he
explained.
Professor Dariusz Rosati believes that the main current economic growth factors include the
improvement of labour productivity by increasing the level of education of the societies
and upgrading the qualifications of employees, development of research and
implementation
of
innovation
in
production.
Another factor of growth is increased labour force participation. – A higher level of labour
force participation is justified by long-term trends, such as longer average life expectancy
and
improvement
of
health
standards,
stated
Dariusz
Rosati.
The third factor named by the Professor is entrepreneurship, which he sees as the basic
characteristic of fast developing economies. - It is small and medium-sized enterprises on
the
whole
that
create
new
jobs
in
all
countries,
he
explained.
Professor Dariusz Rosati pointed to the need of a new growth strategy which would take
into account those three elements. He stated that we should think what can be done to
unlock the possibilities of economic growth in Europe without incurring significant financial
outlays. He enumerated four main activities in this regard, namely, the completion of
building the single market, ensuring macroeconomic stability by improving the economic
governance system in the EU, implementation of structural reforms and reform of the
financial
sector.
Participants of the debate at the meeting raised i.a. the issues concerning the ways to
restore the lost economic balance in the EU, an approach to competitiveness or the rift
between
the
real
economy
and
finance.
Opening the discussion, the Chair of the Public Finance Committee of the Sejm Paweł Arndt
referred to the EU response to the financial crisis. - For three years, the governments of
our countries and the entire European Union made numerous important decisions, but we
can
see
that
there
is
still
much
to
be
done,
he
admitted.
The representative of the German Bundesrat Norbert Walter-Borjans agreed that the
European Union Member States must adopt a more active approach to the crisis. – We failed
to draw sufficient conclusions from previous troubles, he noted. He also drew attention to
the disproportionately fast development of the financial economy as compared to the real
economy.
Göran Pettersson from the Swedish parliament stated that one of the European Union’s
problems was its approach to competition. He also said that the EU should invest more
money
in
research
and
development
and
less
in
transfers.
Theodor Dumitru Stolojan from the European Parliament spoke about competitiveness,
naming the three actors: enterprises, countries and the European Union. He believes that in
fact the main role is played by the first ones and they should receive support from the
Member
States
and
the
EU.
The representative of the Finance and Budget Committee of the Belgian parliament
Christiane Vienne admitted that there was a rift between the economy and finance. - The
EU priority should be to support the real economy and to improve financial instruments, she
declared.
The Chair of the Public Finance Committee of the Sejm Paweł Arndt expressed his
satisfaction with the fact that the discussion touched upon the support for competitiveness
22
of enterprises and economies and allocation of significant funds for research and
development. He also mentioned the Cohesion Fund and the Common Agricultural Policy as
measures which allowed Poland and other new EU Member States to catch up in many
areas.
I SESSION
19th September 2011, at 9.15 am
Challenges and prospects of the European economic governance
The first session of the meeting of the Chairpersons of the Finance Committees began with
a speech by the Minister of Finance Jacek Rostowski, who emphasized the importance of
discussion on challenges and prospects of the European economic governance in the current
economic
situation
in
the
world.
The global crisis was transformed into a crisis of public finance and of some euro area
countries, said the Minister of Finance. The failure to tackle the crisis would threaten the
cohesion of the euro area and the European Union itself, which in turn could have dramatic
consequences
for
the
world
economy,
he
emphasized.
From the beginning of the crisis, the European institutions and the Member States have
tried to strengthen economic governance mechanisms in the EU, continued Jacek
Rostowski.
The minister enumerated the European Banking Authority, the European Securities and
Markets Authority, the European Insurance and Occupational Pensions Authority and the
European Systemic Risk Board among the institutions which ensure that financial risks, such
as
e.g.
speculative
bubbles,
are
minimised.
Jacek Rostowski highlighted the accomplishments of the European economic governance,
including the compromise on the six legislative proposals (the so-called six-pack) which will
create foundations for strengthened economic governance system in the European Union
and the euro area. This is a great success of the Polish Presidency. We are very proud of it,
he declared. The compromise was reached on 16 September at the informal meeting of the
Economic and Financial Affairs Council in Wrocław. The six-pack is a set of six legislative
proposals to remedy the weaknesses of the governance mechanism which exist in its key
points, said Jacek Rostowski. The six-pack provides a possibility to respond flexibly to
economic
shocks,
he
added.
The Minister emphasized in particular the necessity to introduce the requirement of fiscal
rules in the legislation of each Member State, as provided for in the six-pack. - Rules in the
legal system are helpful and efficient, he declared. It was one of the Polish proposals from
the very beginning of the discussion on strengthening economic governance in the EU.
Among the elements of prevention supporting the public finance discipline, Jacek Rostowski
listed, apart from fiscal rules pertaining to deficit and public debt, the European Semester
which is to support the adherence to the preventive arm, the Stability and Growth Pact and
the excessive macroeconomic imbalance procedure including the scoreboard, which in turn
will
indicate
the
risks
in
the
form
of
macroeconomic
imbalances.
Economic decisions made during the Polish Presidency increase the integration of the
European policy at the macroeconomic, and in particular the fiscal, level, stated the
minister.
Jacek Rostowski also highlighted the importance of structural reforms which may reduce
tax burden, remove barriers to entrepreneurship and employment, stimulate innovation
and enable a faster economic growth and a greater stability of public finance.
- The creation of the European response and financial supervision system, the six-pack (...)
sets the right direction in safeguarding Europe against the crisis, stated the minister.
- In the face of threats to the euro area and the European Union, we must demonstrate our
solidarity and responsibility, said the Minister of Finance. He also quoted Prime Minister
Donald Tusk, who said that solidarity is not alms, but well-understood self-interest. Solidarity on the part of the stronger is essential, he added. He also stated that solidarity
cannot be achieved without responsibility and the countries in trouble must demonstrate
their
responsibility.
23
- A great success we have achieved in Wrocław is a sign and a signal that Europe is able to
cooperate to overcome the crisis we are facing, said Jacek Rostowski. He also emphasized
the importance of responsibility for the decisions. - We cannot waste time (...). We have a
limited period to use the shield provided by the European Central Bank, to ensure security
and stability of the European economic, economic security of our citizens, cohesion of the
euro
area
and
the
whole
European
Union,
he
added.
Speakers at the debate on “Challenges and prospects of the European economic
governance" included a representative of the European Parliament Theodor Dumitru
Stolojan, Chairman of the Finance Committee of the National Council of Austria Günter
Stummvoll, Chairman of the Finance Committee of the Italian Senate Mario Baldassarri,
Chairman of the Budget, Finance and Public Administration Committee of the Assembly of
the Portuguese Republic Eduardo Cabrita, Chairman of the Finance Committee of the
Finnish parliament Kimmo Sasi and the Chairman of the Planning and Budget Committee of
the
Grand
National
Assembly
of
Turkey
Lütfi
Elvan.
The debate highlighted the significance of the decisions which were made on financial
stabilisation
mechanisms
and
the
balance
in
public
spending.
The representative of the European Parliament highlighted the importance of compromise
between
the
Council
and
the
European
Parliament.
- Solidarity is the fundamental value in the European Union. It means (...) that we go
together in the same direction and we assume joint responsibility for our actions, said
Theodor
Dumitru
Stolojan.
- If we want to lead Europe forward, we can only do this with the participation of our
citizens, stated Günter Stummvoll. - We need an economic triangle with restraint on
expenditure, incentive for economic growth and structural reforms ensuring economic
productivity,
he
added.
Mario Baldassarri criticised the wait-and-see attitude of the European Union and expressed
his
hope
for
creating
the
United
States
of
Europe.
Participants of the discussion agreed that the decisions made in Wrocław were right.
Closing the first session, the Minister of Finance Jacek Rostowski said that there was no
single measure to prevent accidents (...). We should act to prevent the losses.
OPENING
19th September 2011, at 9.00 am
Vice-Marshal Wenderlich: The EU must act together to overcome the crisis.
–The European Union needs to strengthen governance and financial supervision to allow us
to respond to the developments in the world economy more quickly and efficiently, said
Vice-Marshal Jerzy Wenderlich, opening the meeting of the Chairpersons of the Finance
Committees of the EU Member States’ parliaments today (19 September). He emphasized
that the EU must act together in order to face the challenges related to the crisis. The
conference on the single economic governance in the EU is organized as part of the
parliamentary
dimension
of
the
Polish
Presidency
of
the
EU
Council.
- I am very pleased to see the increasing activity and involvement of national parliaments
in the issues concerning the future of the uniting Europe, said Jerzy Wenderlich. He
reminded about a number of mechanisms introduced by the Treaty of Lisbon which enabled
the parliaments’ more active participation in the EU lawmaking process.
The Vice-Marshal of the lower chamber of the Polish parliament referred to the initiatives
aimed at improving the coordination of economic policies in the European Union. He
mentioned the first European semester, which has just finished, and which is a significant
step towards introducing the European dimension into the planning of national economic
policies. He also referred to the finishing work on the so-called ‘six pack’, i.e. a package of
six draft EU legal regulations reforming the economic governance and strengthening
supervision
over
budget
and
macroeconomic
policies.
24
Jerzy Wenderlich also praised the changes in the European financial supervision, in
particular the establishment of the European Systemic Risk Board, whose task is to
supervise the European financial system and prevent systemic risks to financial stability in
the European Union. – To be efficient, the reforms need to be consistently implemented
and
complied
with
in
a
responsible
way,
stated
the
Vice-Marshal.
- Work on rescue programmes and measures is underway and national parliaments should
be engaged in such work to the greatest extent possible, said the Vice-Marshal of the Sejm,
speaking to the Chairpersons of the Finance Committees of the EU Member States’
parliaments. - Your voice must be present and strong in the European debate, he added.
Jerzy Wenderlich explained that the discussion on financial and economic governance in
the EU is of fundamental importance. – I believe that the today’s meeting will be an
important step towards formulation of the rules which in future will contribute to the
improvement of the competitiveness of the European economy, will stabilize the common
currency, stimulate economic growth and, what is the most important, enable an efficient
and coordinated response of the EU to the threats arising in the world economy.
The Chair of the Public Finance Committee of the Polish Sejm Paweł Arndt pointed to the
need to elaborate new EU principles for the functioning of the common currency,
coordination of economic policies, financial planning and supervision. He highlighted the
need to create mechanisms which will determine the economic governance objectives and
principles, on the one hand, and will ensure the enforcement of the adopted rules, on the
other
hand.
The earlier mentioned 'six pack’ prepared by the European Commission is to serve this very
purpose. The Chair of the Sejm Public Finance Committee explained that four drafts
included therein focus on budget issues, including the reform of the Stability and Growth
Pact. The remaining two are to identify and eliminate the distortions to the
macroeconomic balance in the EU and the euro area. - Determination of us all is the key to
success,
stressed
Paweł
Arndt.
According to the chair of the Sejm Public Finance Committee, healthy and balanced public
finance is the basis for efficient and undisturbed functioning of the European Union and the
euro area. He stated that measures aimed at strengthening economic governance,
tightening the rules of the Stability and Growth Pact and reducing debt should be
supported. They should help overcome the current crisis and prevent similar problems in
future.
Referring to the end of the first European semester, Paweł Arndt stated that programmes
included therein constituted a good basis for sustainable growth, meeting the fiscal
challenges and stimulating ambitious reforms at the national level. Paweł Arndt also
referred to the decision of the European Council from March establishing the European
Stability Mechanism to replace the current stability mechanisms. He reminded that the
mechanism is to safeguard stability in the euro area in the case of possible insolvency of a
Member State.



POLISH
PRESIDENCY 2011
SEJM - EUROPEAN UNION
SENATE – EUROPEAN
UNION
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