The most important thing the EU can do now

The global economy has been lead into a crisis of vast proportions by a financial system which was allowed to operate beyond the effective control of regulators at national and at international level.

This was not merely the failure of individual regulators or even of regulatory institutions; there was no will to restrict the activies of the financial industry until it became obvious that the highly complex credit structures were no longer sustainable. It is not sufficient, therefore, to replace individuals regulators or to rebrand the regulatory institutions. There must also be a fundamental realignment in which the regulators have genuine control over the banks and other financial service providers. The regulators must also have real independence in the conduct of their functions.

I believe, therefore, that the most important thing the EU can do at this critical juncture is to build a system of European financial regulation with real power and independence which will restore credibility to the banking and financial system. Ideally, this European regulation would operate in tandem with reformed institutions of financial regulation in other major financial markets, especially in the US and Japan, but Europe cannot await reforms in other markets.

I think this system of European regulation should oversee reformed regulatory institutions at the national level. The European regulator should be separate from the existing Eurosystem of central banks and should include all 27 Member States, whether or not they have adopted the Euro, and particularly the UK whose financial service industry is of global importance. Switzerland might be associated via the EEA.

This is a very technical field and my proposal is merely an outline of a
concept. Nonetheless, I think the citizens of Europe realise the gravity of the issue and should be ready to discuss proposals in this field.

I look forward to hearing other ideas on how this problem can be tackled.