“A time will come [...] when we will have the United States of Europe,” the Lithuanian eurocommissioner told 15min in his Strasbourg office in the European Parliament building.
At the time of the interview, Šemeta was planning a trip to Vilnius to take a look at the new Government of Social Democrat Algirdas Butkevičius and to have a talk with it on topics of the day. Last Thursday, EU finance ministers endorsed a decision to set up an EU banking supervision authority with the power to close bad banks in any euro zone country.
– EU leaders have had many meetings on how to save the euro. The states have already given their blessing to a revolutionary plan on greater banking supervision that has the potential to turn the union into a federation. What is it for?
– The crisis has unambiguously shown that there is only one chance for the euro to continue existing for centuries to come – further integration. It turned out that a monetary union unbacked by closer financial and economic integration, even stronger political ties, can be vulnerable.
In the global world, Europe can continue to play an important role provided it acts in unison. Observing developments in other major countries, one is left with little doubt that, within several years, even the biggest European countries will look relatively small in the global context. Deeper integration could be an answer to the quest of maintaining our say in matters pertaining to the entire world.
Critics say that pressures in the markets have abated somewhat. It is the view of the European Commission, however, that the crisis is not over yet. The markets give credit to Europe on the strength of the political statements by its leaders promising deeper integration. The credit of confidence can soon expire if no tangible steps are taken, leaving us where we were before.
– How realistic is this plan?
– The agreement on banking union does not require amending any treaties. All state leaders expressed their political will to work towards this goal. There are arguments about the particulars, but no one objects to the need of a banking union as such.
EU finance ministers have already endorsed a centralized banking supervision authority, while the European Commission has proposed a project envisaging other steps towards common restructuring mechanism, greater coordination in deposit insurance. When all these elements are put in place, we will have a tangible banking union.
This will allow to cut the umbilical chord between public finances and banking. As things stand now, if the situation in public finances deteriorates and the banks have given out many loans and own government bonds, they, too, get in trouble – it takes more money to solve their problems which, in turn, depresses public finances even further. Our main goal is to disassociate potential troubles in banking from public finances.
– Which version of the European Union do you see as more viable – the current one or the one with even more integration and in areas other than finance?
– The future for Europe is more integration. A time will come – it is still too early to say when this might happen – when we will have the United States of Europe or something of that sort.
Some of our suggestions envisage steps that require making changes to the treaties – and rather big changes at that. But one must not get a scare – we are not talking about building something analogous to the Soviet Union. It is an entirely different model, a voluntary integration and handing over of parts of national sovereignty; but at the same time, it means political and democratic accountability of those institutions the sovereignty is handed over to. In a more integrated Europe, interests of sovereign states will be carefully guarded.
– Lithuania's new Prime Minister Algirdas Butkevičius says that the country could adopt the euro in 2015. Does it make sense to rush? For Estonia, participation in the European Stability Mechanism will cost around 1.3 billion euros.
– My reply has always been – and I will stick to it – that Lithuania will be better off in the euro zone and that it should strive to join as soon as possible. Our monetary policy system works in such a way that makes us de facto users of a euro-substitute, the litas, which circulates in the domestic market but does not allow us to use all the benefits of being in the euro zone. There is also the risk of the currency exchange rate – as long as you are outside the euro zone, there remains a possibility that the exchange rate can be revised, something that investors take note of.
Estonia has already adopted the euro, Latvia is striving to have it in 2014. All payments, loans, and guarantees [to struggling euro zone countries] must be seen in the light of the fact that the money is not just given away. The current mechanism loans the money to the countries in greater trouble. The donor-countries even earn interest for the loans they give.
On the other hand, one can never be sure one will not be in need some day. It's great that Lithuania seems to be in a sound macroeconomic condition and is one of the few EU states that are not under any macroeconomic threat as far as the European Commission knows. But that does not mean one cannot get into trouble in several years or decades. The euro zone provides mechanisms to help countries in need.
– Last Wednesday, the European Parliament supported your initiative to introduce taxes on financial transactions if any of the parties is based within the EU. Will it not turn out to be yet another tax distorting the behaviour of economic subjects yet bringing little revenue to the budget?
– The crisis was caused by irresponsible actions of banks. States have poured billions in order to save their banking systems. According to estimates, the sum was 4.6 trillion euros in the EU alone – a number truly difficult to grasp. The money did not come from nowhere – it was collected from taxpayers. There is a legitimate wish to have the financial sector return at least part of the money to the public finances.
This market instrument will discourage banks from indulging in risky financial transactions. Primarily, I have in mind the so-called high-frequency trade between computer algorithms that make thousands of deals per second and any single mistake or misjudgement can instantly cause problems in one bank or another. The small tax I've suggested should discourage from over-indulging in such operations.
At the same time, the tax would make banks finance tangible economy. Small, mid-scale, and even big businesses are facing real financing difficulties – it is hard for them to secure loans.
Justice is an important factor – almost all EU member-states are cutting spending and raising taxes. People naturally wonder – why haven't banks chipped in to help bear some of the painful load.
– You were Lithuania's minister of finance between 1997 and 1999. Would you agree to take the post again if the current Government came forward with the offer?
– I haven't given it much thought, as I have enough to worry about both in my own province as well as regarding EU in general. The Lithuanian cabinet is now in full package and all I can do is wish it success in achieving everything it has promised to.