EU debates reaction to financial turmoil[fr][de] 

The EU's "economic fundamentals are solid" and "should not be significantly affected by the recent turbulence", Economic and Monetary Affairs Commissioner Joaquín Almunia told Parliament on 5 September 2007. 

Nevertheless, he cautioned that the "impact of this market turbulence could go beyond what we have seen so far". Almunia especially mentioned the effect that the crisis could have on confidence and thus on investment and consumption decisions.

Meanwhile, the OECD has lowered growth forecasts for the US and the EU as a consequence of the recent turbulence in financial markets. In its interim assessment the OECD's chief economist Jean-Philippe Cotis said that prospects were less buoyant, but expects the eurozone to pick up soon.

Internal Market Commissioner Charlie McCreevy rebuffed calls for a regulatory response from the Commission. He warned: "Fast policy action is likely to be a bad reaction." However McCreevy criticised credit rating agencies' slow reaction to the crisis and expressed concern about potential conflicts of interest.

However, some MEPs have called for more regulatory action in response to the crisis and asked for improved transparency, supervision of financial markets to be stepped up - especially hedge fund operations - and more cooperation from international financial market authorities.

Conservative MEP John Purvis said that the ECB can be "given credit" for its reaction to the crisis. However, he said that the current situation was "not a justification for a witch hunt on hedge funds".

Socialist MEP and chairwoman of the Committee on Economic and Monetary Affairs, Pervenche Beres, said that citizens could not understand that in order to pay for the risk taken by others, the ECB had to intervene to guarantee market liquidity. She called for a code of conduct for rating agencies to counter conflicts of interest and increase transparency.

Christian Democrat MEP Karsten Friedrich Hoppenstedt argued in favour of more transparency in financial markets in order to limit the risks. He said that hedge funds were often involved in the sub-prime mortgage market and should therefore be covered under EU regulation. He called on the Commission to "look at transparency for hedge funds in order to help reduce financial risks".

Socialist MEP Poul Nyrup Rasmussen said: "The financial crisis is a wake-up call for Commissioner McCreevy and all of us". He urged the Commission to introduce rules of transparency and accountability for hedge funds, stating it was "time to regulate".

Internal Market Commissioner Charlie McCreevy replied: "I believe that 'light touch', principle-based regulation is the best approach for the financial sector. More regulation would be the worst we can do." However, he agreed on the need for more transparency, but argued that there were other ways than regulation to achieve this.