“Time for the EU to decide on the supervision of banks”

by Anders Borg, Minister for Finance and Mats Odell, Minister for Local Government and Financial Markets

Bringing order to financial markets and addressing the economic crisis is one of the Swedish EU Presidency’s main priorities. It is not difficult to understand why. The world, Europe and Sweden are still living with the consequences of the global financial crisis that erupted in autumn 2008. In Europe, millions of jobs have disappeared in the past year. In Sweden, the crisis has led to over 100 000 lost jobs. Many countries, whose public finances are in a terrible state, must now engage in a comprehensive process of fiscal consolidation. The road back to stability and growth is long and arduous.

We are experiencing a crisis of historic proportions, with comparisons being made with the Great Depression of the 1930s. This crisis originated in global macroeconomic imbalances, complex new securities, inadequate regulation, inadequate supervision of financial markets and the greed and irresponsibility of a financial industry constantly wanting more.

Politics has two distinct roles to play in the current situation. The first is to mitigate the impact of the crisis and help accelerate the economic recovery. The second is to formulate the response required to counteract the harmful effects of a similar crisis in the future. Both tasks must be solved by an EU working together.

To prevent financial crises from bringing down an entire economy, the state – ie the taxpayer – often steps in and supports systemically important banks. Such interventions tend to be expensive for the public, but they must be contrasted with the costs to the entire economy of a collapse of the financial system.

The financial sector has this year been given more support than ever before. According to the IMF, the supportive measures amount to more than 5 000 billion Swedish kronor. Within the EU, we quickly agreed on a coordinated package of measures, to prevent one country’s solution from becoming another country’s problem.

While we have dealt with the most urgent situation, we must also tackle the underlying causes of the crisis and help prevent the emergence of new financial crises. The Swedish Presidency has devoted considerable energy to finding ways forward towards greater stability. The need for new, stronger rules and institutions has been a priority. We have worked for greater regulation and the creation of powerful new European financial market supervisors to address potential crises. Significant progress has been made:

* Better and more efficient financial market regulation. New authorities with a clear mandate will allow the EU to face an increasingly international banking industry and reduce the risks of imbalances and crises harming households and businesses.

* Cross-border supervision of financial systems. A European Systemic Risk Board (ESRB) will be set up to monitor the stability of the financial system as a whole. The Board will meet the demands that a more complex and globalised financial market brings.

* New European rules for capital adequacy. They will make banks more resilient to losses in bad times and reduce the risk that households and businesses are affected by a constrained credit supply.

* An end to the harmful bonus culture. Consensus has been reached on new common rules that promote a sound and sustainable long-term development of banks and prevent risky behaviour that threatens the stability of the financial system. The greedy accumulation of wealth must not come at the expense of society and its stability.

Besides the goal of bringing more order to financial markets, Sweden has taken on the challenge of addressing the state of public finances in the EU. Large fiscal deficits and rising public debt risks undermining the whole of Europe’s recovery.

In this context, the Member States have, during the Swedish Presidency, agreed on the so-called Gothenburg principles of how to return to sound public finances, through the establishment of a so-called exit strategy. Countries with poor public finances have a very difficult journey ahead, with likely tax increases and expenditure cuts, which will hit public services hard.

The efforts to create stability in financial markets are now entering an intensive phase. A crucial cornerstone in the construction of a new regulatory and supervisory structure is still lacking, namely the new and more effective authorities that will follow financial institutions and constitute the micro-prudential supervision at the EU level, for the banking, securities, and insurance sectors. These supervisory agencies will, for example, be able to carry out binding mediation in disputes between member states’ regulatory agencies and can, in crisis situations, receive specific, supra-national powers. In negotiations we will also push for the right of these agencies to, in some cases, make decisions aimed directly at financial institutions that don’t act according to EU regulation, if national authorities have failed to implement the common rules.

It is important that we maintain the drive to reform. Throughout history we have seen that the willingness to change old structures tends to decrease with time, as the original crisis fades into history. As a result, necessary reforms have not been carried out and crises have recurred. The Swedish Presidency’s ambition is that we can decide on the establishment of the new supervisory agencies. In addition, we intend to agree on a framework for more transparent rules on openness and exchange of tax information, in order to prevent money from being hidden in tax havens, thereby avoiding taxation. It is unacceptable that some countries serve as a base for tax evasion.

We believe we have a responsibility to act, based on the conclusions we have drawn from the crisis. A return to “business as usual”, with a lack of regulation and supervision as well as excessive bonuses and risk-taking, would be insulting, dangerous and cynical. It would also be a slap in the face to all those who have lost their jobs during the crisis.

Next week EU’s finance ministers will meet for a crucial meeting in Brussels. If we succeed, we will have managed to create effective rules for the increased stability of banks and other financial institutions within the EU. We have also already created a strong financial market supervision and prevented unhealthy bonuses and compensation. Sweden’s message, in our Presidency role, is clear. It is time for Europe to decide. A stronger regulatory framework and more order in financial markets will improve Europe’s ability to keep greed and irresponsibility locked up, thus benefiting stable growth and employment. It will also benefit the economy and jobs in Sweden.

EU launches a 90-million Euros cooperation project

It will provide financial support for large investments in the area of energy efficiency and the environment in Eastern Europe countries.

The new cooperation project is a Swedish EU initiative and goes by the name of Eastern Europe Energy Efficiency and Environment Partnership (EEEEEP). Other countries involved in providing financial support to the EEEEEP are Denmark, Estonia, Latvia, Lithuania, Romania, Norway, Poland and the United States. The European Commission will also provide extensive financial support to the partnership, as will Ukraine.  The pledges made at the donor conference amounted to just over EUR 90 million for the period 2010–2014.

“There is a great need for reforms in the energy sector in Eastern Europe. Energy use in Ukraine today is only one third as efficient as in the EU countries on average. This new cooperation project provides clear support for the implementation of reforms and is a concrete measure ahead of the climate negotiations in Copenhagen (COP15). Modernising the energy sector in Eastern Europe is also key to greater energy security in Europe as a whole,” says Minister for International Development Cooperation Gunilla Carlsson.

Involved in the EEEEEP are a whole host of bilateral donors, the European Commission, Ukraine and international financial institutions such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), the Nordic Investment Bank (NIB), the Nordic Environment Finance Corporation (NEFCO) and the World Bank/International Finance Corporation (IFC).

Work in the EEEEEP will initially focus on the financing of large public projects in Ukraine, especially in the district heating sector. Other energy and environmental measures may also be eligible for support. In order to receive financing, investments should lead to a significant reduction in energy consumption and positive effects on the climate.

The money paid into the support fund for the EEEEEP will be used to finance preliminary studies and as investment grants for larger projects, in combination with loans from the international financial institutions involved in the EEEEEP.

A low carbon economy the way out of the EU employment crisis

The current crisis is taking its toll on EU labor markets, reversing most of the employment growth achieved since 2000. If we want EU to fully recover and get back on a growth train again, though, we must focus our employment policies on preparing for the transition to a low-carbon economy.

The invitation is included in the latest Employment in Europe Report just released by the European Union.

Men, young people, the low-skilled and workers on temporary contracts have borne the brunt of the employment contraction. Employment in the EU has shrunk by over 4 million jobs since the start of the crisis, although the effect has been somewhat mitigated thanks to the use of shorter working hours and other schemes. But these short term measures, however important, are not in themselves sufficient to ensure a successful exit from the crisis.

Vladimír Špidla, Commissioner for Employment, Social Affairs and Equal Opportunities said: “This report shows how important it is to reconcile our short-term response to the crisis with our longer-term structural reforms. These reforms are essential for the EU economy and labour markets to emerge from the current downturn well prepared for future challenges, in particular the transition to a low-carbon economy.”

With this challenge in mind, the 21 st annual edition of the Employment in Europe report takes a deeper look at two key issues for future EU labour market policy: movements to, from and between jobs and the implications of climate change for the job market.

EU labour markets are more dynamic than often believed, but long-term unemployment remains a serious threat

European labour markets have shown considerable dynamism in recent years, as every year, around 22% of European workers change jobs. Such dynamism is not just limited to countries usually seen as ‘flexible’, such as the UK or Denmark, but concerns all EU countries, although the figures range from 14% of workers in Greece and 16% in Sweden to over 25% in the UK, Finland, Spain and Denmark. This appears to be part of a more sustained rise, since the late 1990s, in transitions from inactivity and unemployment towards employment in the EU, suggesting a fundamental structural improvement in our labour markets.

However, not all workers have benefited equally from this positive trend. Although the number of long-term unemployed has declined since the 1990s, this problem remains a serious challenge. In recent years, close to 45% of all unemployment spells lasted longer than a year in the EU, compared with only about 10% in the US. Tackling this issue has become even more urgent since the start of the crisis. Policies aimed at supporting workers’ transitions toward employment in line with the principles of flexicurity are key to lowering long-term unemployment and preserving employability.

Low-carbon policies will significantly change EU employment structures

The EU’s moves towards a competitive low-carbon economy will become important driving forces from a labour market perspective. Although the total net job creation effects may not be very large – as creation of new ‘green’ jobs and greening of existing jobs will partly be offset by loss of some existing jobs – the underlying structural changes will involve re-allocation of workers across economic sectors and skill types.

Climate change and related policy measures will therefore have an important impact on the future demand for skills. The new competencies required by the low-carbon economy will, at least initially, favour high-skilled workers. However, with market deployment of new technologies, lower-skilled workers should also be able to fill the new jobs – provided they receive adequate training. Hence, policy focus on skills – to ease transitions towards new jobs and to limit emergence of skills gaps and shortages – together with adequate social dialogue are the main ingredients needed to facilitate the shift to low-carbon economy.

EU Environment Council confirms goals for Copenhagen

The European Union Environment Council confirms EU’s overall goals for the United Nations Climate Change Conference to be held in Copenhagen on 7–18 December. The environment ministers confirmed the EU’s position and the mandate for negotiation that was established at the Environment Council in October and then endorsed by the heads of state and government at the European Council. Many Member States stressed the important of upholding the goal of 30 per cent emissions reductions as a lever to get others to make sufficient offers and put money on the table, both immediately after Copenhagen and in the long term. The EU has also set the long-term goal of reducing emissions by 80–95 per cent by 2050.

“The EU is united and well prepared to make Copenhagen a success. For the EU, Copenhagen is not ‘a step’, it is the step, it is the milestone in the work on climate change. The EU will push for a comprehensive agreement involving all countries”, says Minister for the Environment Andreas Carlgren.

“All parties must present sufficient offers on emissions reductions and financing. This applies to both industrialised countries such as the USA and rapidly growing economies such as China. Copenhagen must also be the starting point for rapid measures against deforestation, and money for this must be made available immediately.”

The European Union is working for an ambitious, comprehensive and legally binding global climate agreement that will prevent global warming reaching dangerous levels, that is, more than 2°C above pre-industrial temperatures, as researchers have projected for this century.

The EU has independently committed itself to reducing its emissions by at least 20 per cent by 2020 compared with 1990 levels, and is now implementing this reduction with the help of a legislation package that entered into force earlier this year, along with a comprehensive programme for increased energy efficiency.

The EU has also committed to reduce emissions by 30 per cent, on the condition that other industrialised countries collectively agree to make comparable reductions and that developing countries with rapid economic development contribute to a global agreement to the extent that they are able.

So long EU

Bureaucrats win over Democracy

Sorry but I am really and deeply disappointed by the choice. Mr van Rompuy is the perfect representative of Brussel’s bureaucracy and bureaucrats: just what it takes to enlarge the gap between EU and its institutions, on one side, and its citizens.I had been hoping in a sudden turn toward more democracy by the Eu, the appointment of the first President seemed to me like THE chance to to invert the route and retrieve the citizens’ support.

All Eurostat researches, and the decades long trend of EU Parliament elections are clear evidence of the distance between EU and its citizens. A dramatic turn was needed. The appointment of a “son of EU bureaucracy” does but kill even the slightest of hopes.

Frankly speaking, I am not confident in the European Union future, I see in a not distant future the toy breaking apart, with citizens and EU institutions going different way. EURO, political agreements, non-democratic behavior, carelessness of voters’ will (non participating to elections is a clear indication) will but build an unfavorable environment. The example of Soviet Union and its empire should be a clear lesson from the past: no matter what you do, if you do not take people into consideration and dismiss their instances, sooner or later the pressure will grow high enough to sweep you off.

US lagging behind on climate change

The U.S. Senate will postpone until next year its debate on energy and climate legislation, along with its controversial plan to cap greenhouse gas emissions.

Key Senators, including Senate Majority Leader Harry Reid (D-Nev.) and John McCain (R-Ariz.), said that the climate and energy bill will have to wait while the Senate tackles bills aimed at reforming the nation’s health insurance system and financial market regulation. The delay follows the harshly criticized, recent pact between Washington and Beijing for a non-binding agreement at the United Nations Climate Change Summit in Copenhagen.

The proposed cap-and-trade legislation has drawn harsh opposition from Republican lawmakers and industry groups such as the U.S. Chamber of Commerce and the American Petroleum Institute on the ground that it will increase energy costs and harm the economy.

In June, the House passed the American Clean Energy and Security Act, which includes a cap-and-trade system aimed at cutting the nation’s greenhouse gas emissions by 17 percent by 2020.

A corresponding Senate bill from John Kerry (D-Mass.) and Barbara Boxer (D-Calif.), which would seek to cut those emissions by 20 percent by 2020, was passed by the Senate environment panel earlier this month.

Republicans have asked for more support for nuclear power and offshore oil drilling in any legislation. Earlier this week, Sens. Lamar Alexander (R-Tenn.) and Jim Webb (D-Va.) proposed a bill, the Clean Energy Act of 2009, that would offer about $20 billion over the next decades, much of it to support nuclear power.

News of a delay until next year leaves the Obama Administration bereft of legislation it hoped to present in December at a United Nations climate summit in Copenhagen to craft an agreement to replace the Kyoto Protocol.

The Environmental Protection Agency has moved on its own to regulate greenhouse gas emissions under the Clean Air Act, but has yet to formulate standards for enforcement. The EPA program is expected to cover 70 percent of the nation’s total emissions, including power plants, refineries, and cement production facilities that emit at least 25,000 tons of greenhouse gases a year.

But the EPA may well face years of legal battles over regulating greenhouse gases, which could lead the agency to look to Congress to pass a bill, Eric Olbeter, analyst with Pacific Crest Securities, said in a Tuesday note.

In the meantime, questions remain over the competing renewable electricity standards contained in the House and Senate energy and climate bills, Olbeter said. The Senate bill would require 9 percent of the nation’s power to come from renewable resources and 6 percent from efficiency gains by 2021.

But Olbeter said it’s likely the Senate will move to adopt the more aggressive measures in the House bill, which calls for 12 percent of the nation’s power to come from renewables and 8 percent from efficiency by 2020.

These renewable energy mandates, as well as provisions in the House energy and climate bill to give new federal authority to site transmission lines, could be taken up separately from cap-and-trade rules, some observers have noted (see Green Light post).

Olbeter predicted that an energy bill without cap-and-trade could pass by May 2010, but questioned the likelihood of greenhouse gas limits being put into law during an election year.

Any energy efficiency provisions passed into law could well benefit energy services companies such as Honeywell and Johnson Controls, Olbeter said.

But he said solar and wind power “are likely to be left empty handed by a hollow renewable electricity standard.”

EU environment ministers meet with an eye on Copenhagen

EU environment ministers will meet in Brussels on Monday, 23 November for an extra Council meeting. The ministers will conduct a final joint review of the positions and strategies just a couple of weeks ahead of the climate conference in Copenhagen in December. Minister for the Environment Andreas Carlgren will head the meeting with his colleagues now and in Copenhagen.

“The EU will work to achieve a result in Copenhagen that is a comprehensive, ambitious and binding agreement, with clear commitments for all the world’s countries. There must also be a clear timetable and guidelines for putting the legally binding regulatory framework in place,” says Mr Carlgren.

In their October meeting, the EU environment ministers established a clear mandate for negotiation that was later confirmed by heads of state and government at the European Council. It contains a 30 per cent emissions reduction as a lever to get others to make sufficient offers, as well as money on the table, both immediately after Copenhagen and in the long term. The EU has also set the long-term goal of reducing emissions by 80–95 per cent by 2050.

“The most important task of the EU now is outreach. The USA and China must put adequate bids on the table. The EU is being proactive and we will continue our leading role. The EU environment ministers are the driving force of the negotiation process. We must be coordinated so we can take up the baton directly from senior officials’ negotiations and complete the task before the heads of state and government arrive in Copenhagen.”

Energy from wastewater

If you ever thought – and you most likely have – wastewater is but a useless by-product, something dirty and foul smelling to enclose in ditches and pipes not to let its stinks reach our noses, well you were wrong. Wastewater can actually be a source of valuable raw materials and energy. In other words, a source of wealth for families, communities and cities, too.

A brand new perspective on wastewater, presented by Prof. Jules van Lier at the Dutch TU Delft’s inaugural address. Developing countries, in particular, can benefit from this new perspective.

“Remember – Prof. van Lier said in his speech – that 2.6 billion people in the world still have no proper sanitation, resulting in 200 deaths per hour, with the highest number among children under five.”

Wastewater is usually seen as a dangerous by-product, which is collected in pipes and gutters and flows into ‘a dump-hole somewhere in the ground’. However, in recent decades, the treatment technologies for removing the harmful components from wastewater have become increasingly effective. And as Professor Jules van Lier points out in his inaugural speech, “on closer examination, wastewater is actually a mixed stream of valuable raw materials from previous economic and/or domestic activities.”

Wastewater treatment plants will eventually become reprocessing plants that produce water suitable for reuse. That will lead to the closing of process water cycles in industries, short cuts in the urban water cycle, the recovery of fertiliser, particularly phosphates, from domestic wastewater, and the converting of organic pollution into usable energy. According to Van Lier, this will lend an entirely new impetus to the process that could lead to the application of new reprocessing technologies, especially in areas where waste water treatment is still seen as a ‘Western luxury’.

“Take domestic wastewater in the Developing World, for example. If we assume a 50 percent recovery of chemical energy, the potential power you can generate from human excreta would be 200 Wh per person per day. Not too much, but this would be enough to light the slums of Africa all night long.”

A decentralised sewage treatment plant could also be of great value to agricultural ferti-irrigation in dry regions. “A city with 1 million inhabitants with an average water consumption of 100 litres a day can theoretically irrigate and fertilise between 1500 and 2000 hectares of farmland. In this way, nutrients from wastewater are put to good use and the farmland also serves as a sand filter to purify the water.”

“We still have a lot of hurdles to jump before we get to this stage, of course. But we mustn’t forget that the current situation has led to ten million hectares of farmland worldwide being irrigated with untreated or barely treated wastewater. More than ten percent of the world’s population eats products that are irrigated with wastewater!”

EU to enforce energy standards for public buildings

Standards will also be extended to cover all new homes and offices from 2020

The EU is reportedly close to introducing new laws that would impose energy efficiency standards on all public sector buildings from 2018 and all new homes and commercial buildings from 2020.

Bureaucrats are expected to put the finishing touches to the Energy Performance of Buildings Directive this week: the goal is significantly reduce energy use across the bloc and provide a major boost to a construction sector deep into a crisis.

The EU Parliament is said to have proposed that all new buildings are made to qualify as zero carbon from the end of 2018. But member states said the goal was unachievable and instead will set a high energy efficiency standard for public buildings, and then later all buildings.

There will also be guidance on how member states calculate building energy use to take account of heating, cooling and hot water.

The move follows the EU’s release last month of a report proposing a wide-ranging programme that would see the European Investment Bank fund energy efficiency makeovers for 15 million European buildings over the next decade.

“Many energy efficiency improvements pay for themselves in energy savings, make our industry more competitive and our citizens richer,” said the European Commission report.

The Commission estimated the initiative could create an extra 300,000 direct jobs a year and around 1.1 million indirect jobs, particularly for builders, roofers, glaziers and other small businesses.

Taken together, the Commission estimates the new funding and standards could reduce the EU’s expenditure on gas imports – mainly used to heat buildings – by over €100bn.

The proposals also mirror plans in the US where energy efficiency standards are included in the Boxer-Kerry bill currently working its way through the Senate.

Revolutionizing the world of energy in Europe

Great challenges require interlinked solutions organized at a large scale: and advancing the necessary energy revolution in Europe represents such a challenge. The “European Sustainable Energy Innovation Alliance” (ESEIA) at Graz University of Technology is born to gather the resources needed to face that challenge. And win it.

The chief objectives of the initiative include creating innovations for sustainable technologies, establishing an interdisciplinary panel of experts, and strengthening measures for further and continuing education.

If you want to ensure the quality of life of future generations on Earth, you have to be aware of your responsibilities today and act accordingly. “If you want to bring something about successfully, all the available knowledge of new energy technologies and concepts must be bundled, expanded and directed, and an entrepreneurial approach to the topic of sustainability promoted”, explains Hans Sünkel, Rector of Graz University of Technology, who has been nominated for the presidency of ESEIA.

A total of 70 innovation partners from 23 nations are participating in the launch phase. Value has been placed on a range of various disciplines. Not only engineers but also political scientists and business schools are represented, as are manufacturers of large wind turbines. Participation to the network is though still open, for scientific and economical partners alike.

“Through ESEIA, we want to take on an exemplary pioneer role in the field of sustainable energy in Europe – in teaching, research and industry”, says initiator Brigitte Hasewend.

By means of ESEIA, a Europe-wide network for sustainable forms of energy and the prevention of the consequences of climate change will develop in the scientific location in Styria. If the “European Institute of Innovation and Technology” (EIT) of the European Commission makes a corresponding decision by the end of the year, ESEIA will be integrated as a strategic partner in the “eCANDO” large-scale project – at the end of August Graz University of Technology applied for a competence centre at European level together with top class international partners from science and industry. The aim of “eCANDO” is to promote an entrepreneurial approach to sustainable energy, to bundle and expand, and to intentionally optimise the flow of knowledge where jobs and economic growth are created in harmony with nature.