After interviews with Party of European Socialists (PES) President Poul Nyrup Rasmussen and European Liberal Democrat and Reform party (ELDR) President Sir Graham Watson, we now take a look at the centre-right European People’s Party (EPP) – the largest political group in the European Parliament. Specifically, we talked to Joseph Daul, Chairman of the EPP Group.
We had several comments come through in response to our earlier interviews – including from Patrick, Christos, Pablo and David – heavily criticising the kind of laissez-faire free-market approach which, they argue, resulted in the current mess. Has the Eurozone crisis called into question the free-market economic model that the EPP advocates? What is Joseph Daul’s response to this sort of criticism?
It was not just market forces and individual greed that caused the financial crisis. At the root lay a lax monetary policy in the U.S. which inundated the world economic system with excessive liquidity. In addition, ill-designed mortgage systems encouraged taking loans without performing prudent checks of the solvability of the borrowers. This fueled a housing bubble. Banks then securitisated these debts through opaque slice and dice operations, which created a vast pool of toxic assets. The prudential supervision of the banks didn’t work well.
A similar bubble existed in some European states. When the bubble burst several banks went bankrupt – we all remember the case of Lehman Brothers – and this created widespread fears in the banking sector. Banks stopped lending to each other. A melt-down of the banking sector could only be avoided by the decisive action of the central banks, especially by the ECB, and through a number of strong steps taken by the governments. As one can see the causes for the financial crisis were manifold, and responding to such a crisis is a very complex operation.
In other words, it was not a fundamental flaw in the Western free-market based approach but, rather, a problem with under-regulation and a lax monetary policy causing cheap credit. Daul does accept a need for greater regulation in future:
The financial supervision has to be improved, as well as the general framework within which financial institutions can operate. This has to happen in a co-ordinated manner with the most important financial places in the rest of the world, especially with the U.S. A free market economy doesn’t mean everyone is totally free to do whatever he or she wants. A sound framework is necessary. Without such a framework market forces can’t achieve optimal results.
But what do YOU think? Does the EPP have the right answers to the Eurozone crisis? Or have centre-right leaders been hesistating and “un-European” in their apporach? Tell us why YOU would vote (or not!) for centre-right EPP parties. Let us know your thoughts in the form below and we’ll take them to policy makers and experts for their response.
Joseph Daul is a French politician and Chairman of the EPP Group in the European Parliament.