By Martin Banks - 12th October 2009
The major responsibility is on the shoulders of European leaders
Poul Nyrup Rasmussen
Former Danish prime minister Poul Nyrup Rasmussen has told a high-level conference in Brussels that an "all-embracing" regulatory framework must be implemented to prevent another economic downturn.
The president of the European Party of Socialists said, at the conference on Monday, that another fiscal crisis "can only be solved by intervention and new regulation."
Rasmussen was one of the most prominent political figures who warned of an impending downturn while he was an MEP in the last legislature.
He told the conference, organised by the Brussels-based Friends of Europe think tank, "If we do not get it right this time and come up with better regulation the next ´bubble´ will be even worse than this one has been which, of course, has already witnessed devastating consequences for the world economy.
"We have come through a golden period of generous liquidity and historically low interest rates. But this created the basis for the ´bubble.´
"There has to be an end to ´soft´ regulation and codes of conduct. We need to understand our responsibilities and adopt all-embracing and all-encompassing regulation that involves all financial actors."
He added, "There does not appear much hope of the US taking the initiative on this, so the major responsibility is on the shoulders of European leaders.
"My fear is that there is now an attitude spreading across Europe that we are on our way out of the crisis and that we should, therefore not rush ahead with regulation.
"The question is not whether there should be regulation but, rather, trying to obtain a common understanding on what should be done."
Another keynote speaker, Joseph Stiglitz, a former Nobel Prize winner in economics, said the cost of the "failure" of the world's financial system had spread far and wide.
"The focus has been on the economic impact," he said, "but this is a mere fraction compared to the consequences it has had and is having elsewhere."
Rasmussen, meanwhile also took a swipe at London Mayor Boris Johnson who was recently in parliament to lobby against tougher regulation in financial markets.
Johnson was in Brussels to make the case in person against the so-called "hedge fund directive" which would limit debt levels for alternative investment managers.
Speaking at a news conference before Monday's conference, Rasmussen said that research by PES showed that more than half the money donated to his mayoral campaign came from the financial sector, including hedge funds and private equity.
This had led to PES accusing Johnson of being "bought off" by financiers. "It shows the impact lobbying can have," said Rasmussen.
Responding to the claims, Glenis Wilmott Labour leader in parliament, said, "Lobbying is fine as long as it is transparent what is happening. It is clear we need to have regulation but it is a long way to go before we have a directive we can all live with."
John Monks, secretary general of the Brussels-based European Trade Union Confederation, said, "There is a furious lobbying effort going on. A lot of people have a vested interest in this, including Johnson."
The one-day conference, entitled "Regulating the banking sector after the crisis," was also told that the health of the banking system remains unstable despite massive liquidity injections and credit facilities by public institutions.
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