Politicians and the Financial Crisis

The same bad language now criticized the bankers for the reckless financial management of their country in the boom years.

Did you notice who the EU during the crisis came on stage and started confidently and with a dramatic lecture financial markets about how frivolous, short-sighted, and rude, they behaved before the financial crisis? These politicians. They immediately and actively began to develop the proposed method for taming the "bad market practices.

It is quite paradoxical. The political elite in most developed democratic countries can hardly serve as an example of care for long-term goals that go beyond the authority and political cycles. In contrast, the ability to see beyond the political elections, by definition, is suppressed in the normal democratic politics. Elections constantly on the horizon, whether they are party, local, national or pan-European. Long-term thinking is in short supply. The actions of politicians can get into the history books, but in order for this to happen, it is necessary to win a series of elections in a short period of time. Long political way - there is nothing more than the sum of failures for short periods of time. Until now, this is consistent with public choice theory, or "economic policy". Therefore, the changes that are so painful in the short term, useful in the long term, but difficult to implement, whether they relate to pensions, health care, labor law or the flexibility of markets at the EU level, the infamous Lisbon strategy, which is the EU's failed attempt to catch up and surpass "United States.

The financial sector is also often criticized for not having been formed airbag in good times for the insurance for the time is not so favorable. And even in this situation, politicians are trying to show off the virtues, citing the previous crisis years of the "great moderation" in the management of the state budget, during which growth has been stable and inflation low.

Nevertheless, from 2000 to 2007, the overwhelming majority of European countries already had a substantial budget deficit. Every way the EU has demonstrated its commitment not to allow participating governments to allow a budget deficit greater than 3% of GDP in bad times. In good times, which is already behind us, the budgets had to be balanced and even create reserves. However, thanks to creative thinking by EU finance ministers, the permissible threshold of this criterion has been changed not only for the bad times, but for good. And even this criterion has been repeatedly violated in many countries, both east and west of the EU (see chart). I read with a smile conclusion ECOFIN (Council of EU Finance Ministers), which virtually every month with a serious face offer a new type of reporting, regulating or controlling a new tool designed to compel financial sector to think about the bad times to the present moment. Often, these are the same ministers who are responsible for the numbers in the chart.

On the one hand, many politicians give scolded bankers for the "herd behavior" that led to the destabilization of the entire market. On the other hand, they write a new directive that will limit the opportunities for banks and other financial institutions in matters of their own making decisions that will lead to greater vysheupmyanutogo "herd behavior". Regulation - there is nothing more than the prescribed behavior "herd." Sometimes it affects positively, sometimes - not. In any case, the same straitjacket can bind and those financial institutions that have not followed the "herd" and came out winners of the crisis.

Moreover, it is ironic that in today's EU new regulatory measures were written and promoted mostly big western countries whose financial systems are most affected by the crisis. Just imagine what would happen if the new financial regulation in Central and Eastern Europe will be written by Latvians.

Just to be clear: I am not among those who default relates to politics with contempt and disdain, and I do not belong to politicians, as beings from another planet. I have a pragmatic point of view, I believe that a certain type of universal rules in the middle leads to similar results and behavior. Public administration - not the exception. That's why I was surprised how cheap a lecture on markets around the world are taken for granted so quickly and without a doubt, while it is easy to see that the proponents of these lessons are experiencing a serious lack of credibility at the point of view that they are preaching.

Mr. Hampl is vice president of the Czech National Bank and a member of the Economic and Financial Committee of the EU.

The Wall Street Journal