EU Observer | March 16, 2009
By Andrew Rettman

EUOBSERVER / BRUSSELS - The financial crisis is likely to create fundamental changes in the EU. But the bloc is still at an early stage of formulating its response, Belgian industrialist and former EU commissioner Etienne Davignon told EUobserver.

"It's clear that the world will not be the same after September 2008," he said in an interview on 12 March, referring to events last year such as the fall of Lehman Brothers bank in the US, which first put in the public eye what has since become the global economic crisis.

"How does Europe adjust to that change is the question. There is no objective reason to say that we will fail. There is not yet a clear indication that we will succeed in that test, so the jury's out."

The 77-year old Mr Davignon is vice-chairman of Belgian energy firm Suez-Tractebel and president of Brussels-based NGO Friends of Europe. In the 1960s he worked under EU 'founding father' Paul-Henri Spaak in the Belgian foreign ministry and in the 1980s was EU commissioner for industry.

Six months into the crisis, EU governments are at the stage of studying technical measures such as greater bank regulation and galvanising political will for future change, Mr Davignon said. But it will take another 18 to 24 months before the full effects of the crunch become clear.

In the current "grey period," Mr Davignon expects the 19 March EU summit and the 2 April G20 meeting in London to generate goodwill for co-ordinated action, but not to come out with detailed agendas.

"These two meetings are going to be important because of what [the media] will say - is it a lot of jaw-jaw and everything will get worse? Or maybe it's the beginning of a realisation that the world will no longer be the same and we are going to do something about it."

A meeting in June in Europe of the Bilderberg Group - an informal club of leading politicians, businessmen and thinkers chaired by Mr Davignon - could also "improve understanding" on future action, in the same way it helped create the euro in the 1990s, he said.

"When we were having debates on the euro, people [at Bilderberg events] could explain why it was worth taking risks and the others, for whom the formal policy was not to believe in it, were not obliged not to listen and had to stand up and come up with real arguments."

Future horizons

Mr Davignon spoke in favour of international bank regulation and dismissed fears that the potential creation of eurobonds - a government bond guaranteed by all 16 eurozone countries - would increase the cost of borrowing for the other 11 EU members.

"National regulation of the financial sector has been a disaster. Ireland is a case. Iceland is a case," he said. "The fact that you are making the euro countries healthier [via eurobonds] is an element that makes the situation of the less healthy less difficult to solve."

The European Commission should relax rules on state aid and public deficits so long as it creates a clear new playbook for all EU states to follow, the Belgian businessman added. But it should not tolerate curbs on the single market as posited by French leader Nicolas Sarkozy, who in February urged French car firms not to move to the Czech Republic.

"That is totally unacceptable ...Yesterday, a French car producer was a French car producer. A German car producer was a German producer. Fiat was an Italian producer. Now they have a French origin, a German origin, an Italian origin. But they are European producers and we told them to be like this."

Mr Davignon predicted that deeper EU integration as envisaged in the Lisbon treaty will continue due to a "majority movement" that is "irresistible over a period of time," even if an individual member state opts out.

A second negative referendum in Ireland on Lisbon "would put on the agenda the notion that if somebody says No, why do we have to care about them?" he said.

Godless and confused

The Belgian aristocrat warned that rising anti-establishment feeling in Europe will complicate attempts to implement new policy. But he indicated that the phenomenon has deeper roots than the financial crisis.

"People understand confusedly that there is a change [in the air]," he said. "But no government will satisfy the reactions of the people. They have the greatest reticence and cynicism against anybody who holds responsibility.

"Against the business community because of the financial excesses. Also, the church has disappeared. The popular reaction is also a consequence of the fact that a number of traditional references have disappeared. People are looking for what is the reference."