at the moment, anti-europe parties are highly popular throughout europe in countries such as the netherlands, Bel-

gium, Finland, Denmark, austria and others. neither pro-european politicians in national go-vernments nor eU politicians in Brussels have offered a strong response to critics. the best that they have come up with is the mantra ‘you’ll have to trust us, we know best.’ Why eU leaders offer so little information remains a mystery, considering the widespread hunger for solid ex-planations and insight. in order to succeed, pro-european politicians need to offer answers that speak to the people on the street—the people who are worried about their jobs and families--because anti-european parties are here to stay, and effective pro-europeans must act accor-dingly.

so, why all the anti-european parties? Becau-se the public doesn’t know what policymakers in Brussels do, and so doesn’t trust them. We’ll tell you what they’re doing: they are trying to put together a banking union. With more than 6,000 banks in 27 different countries unifying these many systems into a coherent organism is not an easy task.

ambitiOuS President Barroso first presented the concept of a banking union in may. in official terms this means taking the next step towards both euro-pean integration and building a stronger econo-mic and monetary union. considering the cur-rent financial crisis, this sounds like a great plan. the banking union would not unify of all of the different banks within the european Union, but should any of them get in trouble, it would break the vicious bailout cycle between banks and so-vereigns on a practical level by establishing a single supervisory mechanism. this supervisor could be, in theory, the european central Bank. officials would break the cycle by creating a eu-ropean (or eurozone, to be precise) fund that could recapitalize banks directly, without having to rely on national authorities as intermediaries.

While ministers of Finance at first welcomed the concept with positive reactions, the time schedule to make it all happen turned out to be overly ambitious when heads of state met to talk about the plan in october. it then became clear that the best possible plan would be simply to put together a legal framework supporting a well-organised banking union by December 2012, and then to take an entire year to implement it. this might sound somewhat disappointing for a highly-praised and awarded organisation. What happened to the effective eU machine? if this banking union is so important to preventing a fi-

nancial crises, or at least to helping us out of the current one and to creating a more stable union, why not speed things up?

DOubtS sylvester eijffinger knows why. He is a pro-fessor of financial economics at tilburg Univer-sity and the single Dutch member on a panel of economic and monetary experts that advises the european Parliament on relations with the european central Bank. eijffinger emphasizes that we should not underestimate the complexity of european integration. in actuality, creating a true banking union means that nation states must hand over a serious part of their sovereign-ty. this is never easy, he says: ‘it will happen as fast as it has to and as slow as it possibly can.

in the end, we all might lose some sovereignty as single states, but we will win some european sovereignty.’

this explains the political barrier to the speedy creation of a brave new plan. clearly, we are not even close to becoming a United states of europe yet. But what was the actual problem at the sum-mit in october? ‘as it turned out, there were a lot of misunderstandings about the agreements made in June [at the european council],’ eijffin-ger says. ‘southern countries like spain and italy had assumed that simple recapitalisation would be possible in any case. even for recent cases, which is to say, banks that are in trouble at this current moment’ he continues. ‘many northern countries like the netherlands, Germany and

bRuSSelS:BankinG Union

or BUst!By Antje Veld

Every day policymakers in Brussels work towards a stronger and more stable European Union. We know about it and we pay good money for it, but what are they actually doing over there? The buzzwords nowadays are banking and union as policymakers struggle to put together a banking union strong and effective enough to prevent financial crises like the one that we are currently experiencing.

32 the inteRnatiOnal CORReSPOnDent the inteRnatiOnal CORReSPOnDent 33

Europe & the World

President of the european commission José manuel Barosso and Herman van rompuy, President of the european council, await member state leaders for talks about the euro crisis. the presidents hope to convince european countries to give up power in return for financial security. most national leaders remain unconvinced.

Photography: European Commssion Media Department

Photography: European Commssion Media Department

the inteRnatiOnal CORReSPOnDent 35 34 the inteRnatiOnal CORReSPOnDent

by DR. Sanjay SHaRma Dr. sharma is former director of maastricht University india institute and professor of international relations and korean affairs, is a strategy advisor on global business and economy. sanjay.sharma@correspondentmedia.nl ReaD mORe COlumnS at www.theinternationalcorrespondent.com/columns

in a letter to the Financial times on 23 october, the group of no-bel laureates recognised the un-folding crude realities in the eU bloc, which is de facto in a reces-sion with no hint of an easy reco-very soon. Bigger economies such as spain and italy continue to deny their respective economic realities while inching towards certain eu-ropean central Bank (ecB) bailout requests. considering this context, the laureates warned that europe cannot afford to continue to hae-morrhage on the knowledge front, for knowledge could be the only tool able to solve the current crisis. they categorically emphasised that only those nations boasting the most skilled, innovative and productive brains will enjoy the realisation of sweet economic dreams. this war-ning, if taken seriously, could pave the path to systematic growth and sustainable recovery in europe over the coming years.

this nobel advice pins down two distinct yet intertwined factors, education and manufacturing, as the keys to a european financial comeback.

First, europeans need to take education more seriously than ever before, as only education can deci-sively boost future economic growth in the eU. although blessed with world-class institutions and re-search facilities, europe has so far made no specific commitment to enhance brain circulation—the sha-ring of the world’s best brainpower--in collaboration with the rest of the

world. the United states provides a vivid example of how inviting bright students, and then further enticing them to stay in the Us, enabled knowledge creation in the silicon Valley, known today for its wealth generation. not only that, but the tightening of Us immigration policy ultimately resulted in the outflow of the same brains to the advantage of their native lands.

as illustrated by manpower-Group’s 2012 talent shortage survey, one in four europe mid-dle east and africa region (emea) employers reported difficulty in fil-ling jobs due to a lack of available talent. Within europe, in countries such as Germany and austria, two in five employers struggle to fill vacancies. moreover, employers in major economies such as Germany, France and italy have failed to re-cruit enough skilled trade workers for roughly six years, while the Uk and Poland have many engineering vacancies. a recent media report cited on the Dutchnews.nl web site suggests that companies in the technical sector in the netherlands face bankruptcy or move abroad be-cause they cannot find well-trained manpower. Quoting siemens ne-derland board chairman ab van der touw, the report stated that this deficiency comes from an aging workforce combined with a lack of vocational training colleges.

meanwhile, the manufacturing sector also cries for urgent at-tention. manufacturing provided a cushioning effect during the reco-

very from the last recession, but now as periphery economies erode, even core economies such as Ger-many and France can no longer hold the bloc together, despite the ecB’s generous quantitative easing plans. according to a recent survey, eurozone manufacturing shrank for the 15th month in october, in the wake of diminishing demand and output. From a global economics point of view, this trend creates con-cern not only for europe, but also for asia, where major economies such as china, india, south korea and taiwan are finally getting back on track, albeit slowly, after months of slowed manufacturing.

clearly, dreaming of recovery remains a futile exercise as long as europe continues to suffer from an absence of much-needed skill sets and the related production dearth. We know, too, that the sovereign debt and unemployment crises are far from over. What europe most needs at the moment is not only better ideas and trained skills-–be they home-grown or imported-–but also a complete reformatting of the eU’s knowledge creation and sub-sequent manufacturing operating systems. in this reformatting alone we find the ingredients for econo-mic sweet dreams. We should put all other matters, superfluous to this successful recipe, on the back burner for the time being.

In the wake of the European Union’s recent Nobel Prize win, critics and fans have debated every aspect of this turn in Nobel history. Nota-bly, and most fascinating to me, was the decision of some 40 Nobel laureates to sidestep the issue of Europe’s Nobel worthi-ness and instead to band together and offer some much-needed advice to the prize’s most recent recipient.

nObel aDviCe fOR tHe euROPean uniOn

ColumnThe Big Issue

Finland did not approve of this at all.’ after a ten-hour meeting that went into the early morning hours, everyone agreed to appoint the euro-pean central Bank as a formal supervisor. they further agreed that this must happen by the end of 2013, but eijffinger has his doubts. He thinks that this is way too fast, and most of all, that the plan falls short on some important details.

CRiSiS ReSOlutiOn a living, successful banking union requires more than just supervision of the banking sector by one central institution. ‘you will need a crisis resolution mechanism and a Deposit Guarantee scheme as well,’ says eijffinger. Furthermore, the ecB will take on some new tasks, and it’s up to policymakers to make sure that the ecB has the necessary instruments to carry these out successfully.

to start with, the crisis resolution mechanism can be as simple as ‘who pays for what?’ as we have seen through painful examples such as the division of the Dutch-Belgian Fortis bank, when

a bank is in trouble, separating the good, salva-geable parts from the bad parts is never easy—never mind finding enough capital to do so ef-fectively. Dutch Prime minister mark rutte and German chancellor angela merkel have made it quite clear that ‘we’ do not want to pay for every mistake made in ‘the south.’ more diplomatically said, ‘to come up with a mechanism that will work on every single national system takes time and a lot of research,’ says eijffinger. the same thing goes for a deposit guarantee that will ef-fectively keep savings safe. at this point, neither issue has been openly addressed in Brussels, which is one of the reasons eijffinger does not yet trust the December 2013 deadline.

the other factor dampening the professor’s confidence is the fact that the european central Bank’s hands remain tied when not equipped with the right instruments. as of now, its main task is maintaining price stability, and it has a li-quidity instrument to do so. But within a banking union, the ecB will have to maintain financial stability as well. therefore, it needs a solvency

instrument as well, but this is currently in the hands of national banks such as De nederland-sche Bank.

it will HaPPen While this might all sound like a never-ending story, it isn’t. the story will ultimately end with the creation of a banking union--at least, that is what eijffinger, who speaks regularly with mario Draghi, president of the ecB, assures us. the big question is: When will it end? nobody knows for sure. some countries, such as spain and France, will try their best to make it happen before the end of 2013 no matter what. others, such as Germany and the netherlands, will slow things down wherever possible to make sure that there will be no surprises in the end. However slowly or quickly, with few surprises or many, we will get a banking union, and the pro-europeans will have a little less explaining to do.

Europe & the World

european leaders stand united in Brussels, but become critical and divided when back home.

‘it will HaPPen aS faSt aS it HaS tO anD as sloW as it PossiBly can'