Balkanisation of European banking takes a step closerDavid Gow in Brussels guardian.co.uk, Tuesday October 07 2008 16:15 BST Article historySaturday in the gilded Salle des Fêtes of the Elysée palace in Paris and we, a few hundred journalists and scores of top officials, witness the flight of the EU's seven leading figures from reality.
Outside, on a chilly but sunny evening, the creeping Balkanisation of Europe's integrated banking system is moving up a gear; inside, they're talking up a coordinated, collective response to combat the risk of a 1930s-style depression.
But they – Nicolas Sarkozy, Angela Merkel, Gordon Brown, Silvio Berlusconi, Jean-Claude Trichet of the ECB, Jean-Claude Juncker of the eurogroup and José Manuel Barroso of the EC – know full well that the EU's financial system is going down the Seine and they're preparing emergency 'national measures'.
But it's close to 8pm in continental Europe and the main and only TV news programme of the day beckons. At all costs, these leaders have to demonstrate to tens of millions of viewers that their leaders are in full command, their savings and deposits are safe and the EU is at one in confronting the crisis. As with climate change, it can help save the world.
Seven leaders, seven individual statements, seven individual questions and then the show's over. Berlusconi, smoothing down his new waxed hairpiece, talks straight to the TV channels he owns and, after a brief word in Sarko's ear, talks incessantly.
Brown, exhausted, adjusts his earpiece and scowls. Sarko and Merkel, the German chancellor who has recoiled at his physical embraces in the past, lean closer and smile tenderly into each other's face, their noses almost touching. Trichet hears a low chant of "Basta! Basta!" from non-Italian journos and laughs.
Sarko, the host, goes into verbal overdrive. Soon, it's over. "So, what's the news?" we ask each other. "There isn't any."
A veteran Spanish colleague tells me: "It's a disgrace. The Spanish banks are taking over yours - they're solid. Zapatero isn't invited but Berlusconi and basket-case Italy are."
"I'm ashamed every time he [Berlusconi] opens his mouth," another old Italian acquaintance says.
"So, what are you Brits going to do, verdammt noch'mal? It's your system, yours and the Americans', that spread this poison," a German friend glowers.
It's all very collegial joking and back-patting as we head over the road to the ornate Marigny hotel - where Gadafy parked his tent in the garden - and the Elysées traiteurs have prepared a spread.
Sunday morning and the mutual recriminations are out in the open. It's every man for himself, or sauve qui peut, as those national crises publicly erupt, demanding beggar-thy-neighbour solutions for local electorates demanding rock-bottom guarantees for their savings – or there'll be runs on the banks all over Europe.
It's easy, of course, to mock the punctured ambitions of the EU and its leaders, not least their 'failure' to agree on a Paulson-style bail-out plan or a pan-European regulator to police the 44 cross-border banks that control 70% of the €32tn of assets in the EU banking sector. (The man/woman on the Brussels tram has never heard of the 'Lamfalussy level three' committee of European banking supervisors which meets occasionally in London and has never voted once.)
As Trichet said last week, the EU is, unlike the US, not a federal state. There is no political union. Eurosceptics slavering with schadenfreude cannot have it both ways: deride federalism in good times and demand it when the bad times roll. The EU is in disarray but so is everybody else. When this crisis is over, Europeans may be forced to club together more closely than they have so far.
Bitter pill for Belgium
OK, so not much chance of that right now. Take Benelux, where the once cuddly, now ruthless, Dutch have forced the dismantlement of Fortis, Belgium's biggest bancassurer, and this week's takeover, via temporary nationalisation, by BNP Paribas. (The Dutch have nationalised its Dutch operations.)
Dismissing Belgium as a banking dwarf when, at the end of last year, Fortis ranked 19th in Europe and was worth €40bn, De Telegraaf, a Dutch newspaper, gloated this week: "After selling its steel and energy groups in the 1980s and 1990s, the Belgians' sole remaining global role is in making beer."
Sounds like we're back to post-Napoleonic Europe and the Congress of Vienna – just before Belgium revolted against Dutch control and, after a nationalist opera at La Monnaie, provoked a riot and won its independence in 1830. For a country constantly on the edge of break-up and yet still the EU capital, it's a poison pill to swallow.
Baudouin Prot, chief executive of BNP, which has acquired Fortis's €239bn of customers' deposits to leapfrog the league table and become the eurozone's biggest retail bank for a knock-down price, didn't mince his words on Monday. Reassuring Belgian clients their accounts are safe in one of the world's top three banks by credit rating, he said: "There was no alternative."
But it didn't help that, as an international banker, he peppered his emollient phrases with English: "C'est le proof of the pudding in the eating" and the like, adding: "I don't know how to say that in Belgian." They, of course, speak French, Dutch and German in this trilingual state.
Anyway, if recapitalisation of Europe's banks means renationalisation so far, Prot held out the dim prospect of a counter-tendency: the ever-greater concentration of the sector in the hands of a few mega-banks.
When I asked him whether BNP had the means to take over other banks in difficulty, he said: "In France, we say you should not have eyes bigger than your stomach … BNP, for the moment, will be pre-occupied with integrating Fortis but that does not mean we will not do anything else."
France, we know, always wanted a united Europe à la française. The Germans who, 15 years ago wanted a European Germany, are now toying with the idea of a German Europe. The two could be about to fight out this battle of ideas in the EU banking sector. |
