Europe finally voted through landmark curbs Wednesday to clamp down on its finance industry just as fears returned that Ireland, like Greece, was staring down bankruptcy. The crossing of the final political hurdle at the European parliament marks the end of fierce negotiations stretching back to February 2009, after the US financial meltdown unleashed the world's worst recession since the 1930s.
Lawmakers in Strasbourg gave their blessing after finance ministers from the 27 European Union member states sealed final agreement on September 7 following months of bickering characterised as a fight between the City of London and Brussels, under the bidding of France and Germany. "This new legislation will create a watchdog able to bark and - if necessary - to bite," said parliamentary speaker Jerzy Buzek.
In a nutshell, the package of laws will create four new pan-European bodies that are expected eventually to seize regulatory power over the dizziest heights of the finance industry. That would cover everything from High Street banks to the riskiest of high-stakes bets responsible for felling some of Wall Street's biggest names.
The curbs will come into being as of January 1, 2011, with the head of the European Central Bank in Frankfurt presiding for the first five years over a politically pivotal European Systemic Risk Board. This will be charged with spotting threats to the continent's economic wellbeing before they hit home. Three sector-specific bodies, essentially covering banks, insurance and stocks - respectively based in London, Frankfurt and Paris - will then acquire powers to order national bodies or companies to change the way they do business.
Industry figures fear their powers will grow incrementally, although a series of political fixes have been worked in to try and prevent ugly cross-border rows over what represents an emergency. Some 80 percent of Europe's finance industry is based in London, rivalled only on a global scale by New York and Hong Kong. And Britain, backed by eastern European allies, secured a special safeguard so that decisions that would could add burdens on taxpayers could not be imposed by EU partners.
Michel Barnier, the former French foreign minister charged with piloting Europe's answer to measures by US President Barack Obama, told lawmakers the measures would allow Europe to "avoid the recurrence of severe crises, protect consumers, and nourish sustainable growth."
"Prevention is always cheaper than cure," Barnier said of traders' gluttonous appetite for risk over the boom years. He also stressed that "in half of all European countries, banks are owned in another country," laying down a marker for more detailed controls on hedge funds and private equity, derivatives or credit rating agencies - whose assessment of national debts stirred panic in the spring.
Despite a successful bond issue on Tuesday, Ireland remains under close scrutiny amid concern that, overloaded by the cost of rescuing banks, it may need help from a mechanism the EU and the International Monetary Fund set up after the Greek debt crisis four months ago.
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