Blair offers post-crash vision for Europe

Tony Blair has financial links in Zurich Reuters

Former British Prime Minister Tony Blair has warned a Zurich audience that a protectionist Europe would be hamstrung in the post-financial crash new world order.

Blair, who has been touted for the new role of president of the European Council, urged governments to disengage state support as soon as possible and concentrate on much needed national reforms.

Blair’s speech at a Zurich Business Society event on Friday went down well in front of the Swiss audience but would have enjoyed less resonance in neighbouring European countries such as France or Germany.

Pointing out that the world was undergoing a major shift of economic power from West to East, Blair called on Europe to act fast to avoid losing ground as China and other countries assume a bigger voice.

“We [European countries] have a strong and profound interest in making sure we are at the table – active, coherent and putting forward strong, unified and clear positions,” he said.

The worst thing Europe could do now was to bow to popular sentiment by tangling the financial system up with regulations, Blair said during his speech, entitled: How will the financial crisis shape the future of Europe/EU?

Short or long view?

“There is an apparent clash between short-term populism and a sensible long-term policy,” he said.

“There is a short-term populism that pushes us towards more government intervention. The purpose of government intervention is to stabilise the situation, but going forward what we need is a thriving and effective private enterprise to lift our economies up and through to better times.”

European states are currently divided on how to reform the financial sector following the devastating crash and subsequent global recession. France is leading the way with demands for tough regulation to curb excessive risk taking and cut banks down to a more manageable size.

Britain strongly opposes too much state intervention, with Switzerland apparently more in tune with this low-key policy.

The Swiss regulator this week rejected the temptation to impose bonus caps, but it is set on forcing banks to beef up capital reserves to protect against risk.

Reform bureaucracy

Blair outlined a vision to the select audience of the Zurich business community that may raise a few eyebrows in the corridors of Brussels, where politicians are also working on proposals to regulate the hedge fund industry.

“In Europe, in particular, we should play a part in keeping the world trading system open and vibrant,” Blair said. “We need the financial sector to be independent and creative.”

Government reform, instead, should concentrate on making domestic markets more efficient during a period when every penny counts for state economies. Blair urged European countries to slim down bloated welfare systems, sort out the mess of pension funds and drive through policies to reduce carbon emissions.

“Many people in Europe think this is the toughest time to make reforms. In my view this is absolutely the period that government and the state should be prepared to make reforms necessary in public services,” he said.

“Seize the moment not to postpone reform but to embrace it in order to come out of this crisis more competitive, more environmentally sustainable and better able to cope with costs for the state going forward.”

Dramatic moment

Blair ended his speech with an example of what a united Europe could do when it got its act together, thus delivering a poke in the eye to critics who believe the EU is too disjointed and cumbersome.

“During the crisis, Europe did come together with a cohesion that surprised some people. But that cohesion is more important when we analyse what type of economy will be created for the future and what type of political mechanisms will be governing the decisions that affect it,” he said.

“This is a dramatic moment and it will require Europe to take some very strong decisions.”

Matthew Allen, swissinfo.ch in Zurich

Tony Blair

Tony Blair was British Prime Minister from 1997 to the time he stepped down in June 2007. He was the longest serving Labour Party PM in British history.

He was then appointed as official Envoy to the Quartet on the Middle East – a body comprising the United States, European Union, Russia and the United Nations. His continuing brief is to promote efforts to secure peace in the region.

Blair has maintained his links with business and the financial community by accepting advisory roles with US bank JP Morgan Chase, and in January 2008, with Zurich Financial Services (ZFS).

Blair’s special brief with the Swiss company is to work on its climate change initiative and specifically how insurance can play a role in this field. He will also advise ZFS on changing trends in the international political environment.

Blair has recently been linked to the as yet unfilled role of the first president of the European Council. The role was created by the ratification of the Lisbon Treaty by member states.