Finland must take part in ensuring fair competition. EU membership is a key element of our political and economic identity, and it’s time for us to reassume an active role in making the EU stronger.
Continuing on the current path may lead to a dead end ‒ as demonstrated by the recent events in the UK and many other European countries. Then again, developing the Union in a more tightly-knit, federal direction is not a realistic option either.
The EU should target fewer policy areas, but with more depth. This would make its operations more focused and reduce regulation in areas that are considered less important. The essential goal here is to ensure a level playing field in the EU financial market (as well as all the other sectors) while also taking care of the Union’s competitiveness against other economic areas.
Focusing solely on the single market could be one workable option for EU States that are not in the Economic and Monetary Union. For the Eurozone, however, it has risks because the common currency requires extensive coordination of economic policies.
In some issues moving forward as one EU-wide bloc might turn out to be unrealistic. That is why Member States willing and able should have the possibility to do more in-depth cooperation. If necessary, they could proceed at a different pace in some policy areas. In this case, too, it is essential to secure fair competition and the functioning of the Single Market. Artificial borders must not be created within the EU, as they can make markets more fragmented and thus less efficient.
The purpose of the EU Banking Union is to increase the stability of the euro area financial market. The Finnish financial sector is in favour of the Banking Union, but we believe increased risk sharing should be undertaken with caution due to its potential of inciting moral hazard. Risk sharing is a complicated issue also due to the vastly different structures of the financial sectors and overall economies of individual EMU countries.
The European banking system has more than €900bn in non-performing loans, with huge differences between countries; for example, Finland’s share of them is about 1.5% while Greece and Cyprus amount for more than 40%. Non-performing loans and other problematic assets slow down economic recovery. These problems have to be solved in accordance with the EU Recovery and Resolution Directive and State aid rules. The primary solutions should be market-based and supported with investor bail-in. Any plans for a bloc-wide asset management company are unacceptable.
EMU, at its current scope, has neither the need nor capacity for developing a fiscal union. Introducing Eurobonds would be a substantial shared risk with a high possibility of moral hazard. The plans are senseless so long as the diverse issues regarding the competitiveness and over-indebtedness of some EU countries remain unsolved. These need to be tackled first.
Common budgets and other macroeconomic stabilisation functions should only be considered between countries that are similar in terms of income level, labour market and the functioning of other markets. Otherwise the common budget will only become one more funnel of money for the needs of a few specific countries.
In addition to the Banking Union, the Finnish financial sector also supports the integration of capital markets. It should be achieved by removing obstacles, not by creating new regulation. A market-based approach is advisable here as well – public authorities should not decide how or where capital flows are allocated. Some euro area countries may drive for even deeper integration in the EU. If this happens, Finland must take part in the development.
An active role in strengthening the EU does not mean Finland should hand over the control of nationally important issues. For example, when developing social inclusion, it is important that decisions on Finns’ statutory pension are made by Finns alone, also in the future.
The broad political consensus in Finland is that we must avoid marginalisation in the EU. We now need to revive our proactive role in steering the Union in a new direction.