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Bruno Lasserre, Dec 15, 2008
The crisis that started with the U.S. mortgage market has spread to the worldwide banking sector. Over the last year, individual defaults have multiplied, even though the central banks massively injected liquidities into the money markets. As a result, confidence has receded, interbank lending has rarefied, and credit has started to crunch. European governments have taken steps to restore trust. At first, their interventions consisted in ad hoc measures of rescue and restructuring—or in some cases of winding down—aimed at handling individual situations. Later, when it became apparent that the size and the intensity of the crisis were unprecedented, these measures evolved into more comprehensive schemes including guarantees, injections of capital, getting rid of toxic assets, and so on. In such situations, there are basically two ways of going forward: either each Member State acts unilaterally, with a high risk of taking fragmented and conflicting measures that may either cancel one another or even make things worse; or Member States endeavor to coordinate their initiatives and come up with a consistent approach, beneficial to all. Europe was created out of a major crisis—Word War II—and it has often moved forward in times of crisis. We are now faced with a global market failure, although situations may obviously differ from one bank to another, from one segment of the market to another, and from one Member State to another. I am confident that, this time again, Member States will agree on a common strategy, just as they have begun doing in the last weeks. The Euro Group and the EU Council and Commission have also started to play their part to ensure this result. The Commission has already accepted almost 25 national measures qualified as State aid, pursuant to discussions that permitted the Member States to design them in a way that was compatible with the common market. Twenty further draft measures are currently under assessment. At the same time, we have heard a number of sirens calling for a relaxation or even a suspension of competition rules. But I said earlier that European and national leaders agreed to restore “trust,” not to restore “trusts”! On the contrary, these leaders have repeatedly insisted that antitrust and, more generally, competition concepts and instruments, are flexible enough to be accommodated in all weather. Of course, as I said in Fordham last September, competition authorities are not wonder-doers. They are not empowered to do everything and they cannot do everything. Their mission and their means are limited. What they can—and must—do is make sure that firms compete on their merits and do their best to attract consumers with newer or better products and services at better prices. Why? Because competition fuels innovation, productivity, cost-effectiveness, and ultimately growth; and because growth translates into jobs, wages, purchasing power, and, ultimately, consumer welfare. Still, competition enforcement is well placed to contribute, in its field of competence, to forging viable solutions to the current international market failure. Let’s not forget that our core business is to make markets work and to prevent or remedy a certain type of market failure, namely changes in structures or market behaviors that harm consumer welfare by substantially lessening competition or excluding efficient competitors from the marketplace. I would like to look at how national competition authorities (“NCAs”) can bring added value to the huge effort of solving the current crisis. I say “can” because a word of caution is warranted: visions never translate into results without hard work. And I shall try to answer the question from the following three angles: Where do we fit in the big puzzle? What can we do? What can we say?