Financial crisis hits the globe!

A quick guide to the EU’s response to the financial crisis

The crisis that started in the US over a year ago has sent shock waves around the globe. Former giants of the financial world have found themselves suddenly facing bankruptcy. Inevitably, the crisis is also having an effect on households and businesses - economic growth has slowed sharply and in some EU countries unemployment has begun to increase for the first time in several years.

In the EU, the turmoil has prompted action on many levels – by national governments, the European Central Bank and the Commission. All have been working closely together to protect savings, maintain a flow of affordable credit for businesses and households and put in place a better governance system for the future.

Looking ahead

Amid fears of a global recession, the Commission is pressing for rapid adoption of measures proposed in June to help small businesses, which create most new jobs in the EU.

It is also asking the European Parliament and the 27 EU member countries to quickly adopt the proposed directive on capital requirements for financial institutions, aimed at reining in excessive risk-taking by banks and improving supervision of banks that operate in different EU countries.

The Commission is drawing up proposals for stricter regulation of credit rating agencies. These agencies advise investors on how safe investments are, but they failed to spot some of the risks that led to the current crisis.

The Commission is also looking at the issue of executive pay, amid concern that highly-paid bankers are not held accountable for making poor investment decisions.

A comprehensive plan to help the EU economy recover from the crisis is also being prepared. It is due out on 26 November and will include short-term measures. At the same time, the Commission has also made a commitment to drive European coordination, to work tirelessly to improve global cooperation and to apply EU law with the maximum flexibility.

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