Sumario: 26 March 2009, Washington DC - Neelie Kroes, European Commissioner for Competition Policy; "European Models for Economic Recovery"; Address at Atlantic Council
Ladies and gentlemen,
While the epicentre of the current crisis was the financial markets here in the US, the ripples have spread across the oceans. Every country is now struggling to keep its head above water, and out of the rip-tides of this first truly global recession of modern times.
Our world is now so interconnected. So as we face this recession together, we need to fight it together too.
On that front I am relatively optimistic. We may differ in details but we share the same strategy. And we are - roughly speaking - applying the same tools. I will get back shortly to some of the tools I think it is important that we agree NOT to apply.
President Obama has struck a course of action here which involves helping the economy back on its feet with increased public funding investing in a greener and brighter future.
In November, Europe adopted a recovery plan with essentially the same core messages.
For those who are not in favour of fiscal expansions, this plan is clearly a step out of the comfort zone.
I am sure it was also a step out of the comfort zone for the US to spend taxpayers money to save ailing financial institutions.
We have gone through similar experiences on our side of the Atlantic. As a lifelong believer in free markets, with a job that normally involves fighting for less and better targeted state aid ... I can tell you that approving dozens of the bank rescues was the last thing I expected to be doing in 2008.
To do this we had to activate a special provision in our constitution that allows for state intervention when there is a serious disturbance to our economy.
But special times call for special measures.
I often think that 10 or 20 years from now my granddaughter - who by the way is an American citizen - may ask me about this crisis, and whether I stood up and did all that I could to fix it. I want to be able to tell her that I did.
And my staff will be able to say the same to their grandchildren.
As a matter of fact, we expanded our crisis team so quickly that we are now working in part out of temporary containers in our courtyard. Not to mention the late nights and lost weekends. None of them needs a retention bonus - they do it because they believe in getting our markets working again. And I am incredibly proud of them.
Last week the economist Paul Krugman paid us a visit in Brussels. I am sure many of you are New York Times readers, so you will know Paul can be a harsh critic of US policies. Last week Europe came in for special treatment: he called us "A continent adrift."
I understand why an outsider may look at Europe and wonder if we are up to the task. But let me make it clear: we are not adrift.
Europe already has the medium-term and long-term policy settings right: an efficient single market that fosters equality of opportunities rather than outcomes. This is what has delivered the most prosperity for the longest period of time in Europe's history. We also have relatively strong welfare states, so automatic stabilisers will help cushion some of the pains that a recession brings.
More importantly, we understand what is at stake. While we lack some of the benefits of a centralised Federal system, we also have advantages.
As Europe's competition enforcer, I have a seat at the decision-making table of Europe's administrative body - the European Commission. This ensures a voice for open markets backs up our constitutional obligations when the big decisions are made. And our structure means all 27 Commissioners must take responsibility for defending our open competitive markets.
What is more, as an appointed body we operate without bending to the popular short-term pressures that many politicians now face - to protectionism or yet more 'earmarks'[1]. As I look at the top three tasks on my desk right now - that is crucial.
The first task is fighting to ensure that we all stay out of the protectionist trap. We need to fight this temptation at all costs.
The second is taking drastic measures to repair the damage to our financial systems. We've avoided meltdown, but that is not enough - until we fix the banks no amount of government spending can fix the real economy.
The third is not going soft on competition enforcement - cartels, antitrust and so on - because it will help us out of recession.
Avoiding protectionism
I understand why politicians are tempted by protectionism - it feels like a quick-fix to the human pain around us. But telling your citizens to "buy American" or "buy Spanish" never works.
Protectionism is addictive. Don't ever listen to those who propose temporary measures. History tells us that the only temporary part is the commitment to repeal it. It is like a pregnancy: you think it's about nine months but there are decades of consequences.
Real leadership requires that we stand up for the policies that will help the most people over the longest period - and protectionism never does that. I'm fighting against it on my side of the Atlantic, and I hope you are on yours.
Fixing the banks
The next stop is avoiding the threat of zombie banks and giving the surviving banks the best chance of long-term health. The lesson from the long Japanese recession is that this is essential to get back on our feet.
Europe's rescue and restructure system for government aid means all aid must be followed by restructure to minimise distortions of competition.
But to make those restructures effective we need full transparency about the state of banks' impaired and toxic assets.
Half-transparency and half-solutions won't help. Banks will have to share all of the information about their impaired and toxic assets if they want the public purse to be available to them.
Some banks may have been too big to fail, but they are not too big to restructure.
Not all of them accept that reality. I have spent the last three months meeting with bank CEOs from all over the world; they all told me that their own bank is sound, but that everyone else is in trouble.
Obviously, some of them are still in denial.
But if it takes some tough love to make them face up to their responsibilities, that is what they will get.
Taking a longer term view, I think it is clear to everybody that we need better regulation and tighter supervision of the banks. In Europe we believe in free markets, but it is now clearer than ever that we can't leave them on autopilot.
We need tougher regulations. There can be no more room for tricks and circumventions. We need more transparency and accountability and we need closer cooperation in the international community.
We all denounce the greed that brought us this mess. But we should not kid ourselves. The greed does not go away just because we ask it to. We have to rebuild our systems.
Competitive markets make recovery easier
Banks aren't the only ones on the receiving end of tough messages. Everyone must be told that there are no quick-fixes.
It would be appalling to make light of the pain people are suffering. But this recession also has to be a wake up call. A catharsis - one that shakes off the idea that one can get something for nothing.
It's a good thing that hard work and innovation is what made America great - because that is what is needed now. Competitive markets are by definition hard work but they offer the best chance of the best recovery. We need them so that those who see the opportunities in the midst of the crisis can grow and deliver the jobs that we need to get out of it.
That won't please every person who has lost a job or politicians being hounded to save this company or that plant. But the point is that nobody is pleased by the situation and we shouldn't expect to be pleased.
Conclusions - political courage
Let me conclude by saying that while I have no illusions that the next year or two will be messy and hard, I remain fundamentally optimistic.
History has posed us with greater challenges than this - and we met them. Sixty years ago, Europe stood amidst of rubbles of the Second World War. Back then things looked far more hopeless than they do today.
Yet, with hard work and support from the Marshall Fund, we secured a better future. A future that brought us decades of prosperity and the European Union that has sent me here today. Today's stimulus packages on each side of the Atlantic are much bigger than the Marshall Fund ever was. We can do great things with them too.
If we stick together, we will find our way through this crisis.
Thank you.
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