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Resolution 1651 (2009)
Consequences of the global financial crisis
1. The Parliamentary
Assembly notes with concern that a sustained period of economic
growth has turned into an almost global recession which for many
countries, it is feared, could be both deep and long. This downturn
is largely due to the financial crisis that hit the global economy
in 2007-08, although it coincides with what appears to have been
the end of a boom cycle marked by a period of highly inflated commodity
and energy prices and the collapse of housing prices. However, the
causes of the financial crisis are clear. Growth during the boom
cycle was prolonged by interest rates that were maintained at too
low a level. Unsound management practices, notably in banks and
non-bank financial institutions, became widespread, and financial incentives
for their employees were set too high. Complex financial instruments
were developed which lacked transparency, and risk management systems
failed to operate effectively. Greed was rewarded through excessively
generous remuneration systems which often continued even as financial
institutions made huge losses.
2. The Assembly is painfully aware that the deteriorating economic
situation is likely to lead to high unemployment, the loss of hard-won
income and assets and mounting indebtedness for those already in
debt. At this time, the Assembly reminds the governments of Council
of Europe member states of their responsibility to protect citizens’
social and human rights. It is essential that the economy should
be redressed as soon as possible, but that in the meantime social
safety networks should counterbalance the economic downturn. Those
countries that have maintained sound state finances during the growth
years are now better positioned to guarantee the benefits of existing
social safety networks for their citizens.
3. Accordingly, the Assembly is extremely concerned by the disastrous
impact that this financial crisis and its economic consequences
are having on the living conditions of the citizens of Europe and
of the world, which could possibly threaten to undermine the very
foundations of democracy.
4. The Assembly considers that the financial institutions have
failed in their duty to provide information and the public authorities
have not lived up to their responsibilities in regard to supervision
of the risks posed by the spread of increasingly sophisticated financial
instruments and have, accordingly, not protected citizens and financial
players engaging in high-risk transactions.
5. The Assembly welcomes the holding in Washington, on 15 November
2008, of the summit of the 20 major economic powers in the world
(G20) and the commitments entered into on that occasion by those attending.
It fully endorses the summit’s recommendations designed to stimulate
the economy, provide liquidity, strengthen financial institutions
and protect savings.
6. However, the Assembly deplores the fact that the G20 action
plan makes no reference to protecting the social and economic rights
of citizens in a period of crisis. In this context, it fully supports
the statement of the Officers of the International Labour Office
Governing Body, adopted on 21 November 2008, calling for six specific
measures “to address the impact of the crisis on the real economy
to protect people, support productive enterprises and safeguard
jobs”, as well as the statement by the Council of Europe Commissioner
for Human Rights on 17 November 2008 calling for “a serious programme
for the protection of economic and social rights”.
7. The Assembly is convinced that strong and effective measures
are needed to soften the recession and that the reform of the global
financial system can be successful only if it takes into consideration,
among other things, the following principles:
7.1. the stability of the financial markets should be ensured
by providing liquidity, restoring lending to enterprises, especially
small and medium-sized firms, and households, and by guaranteeing
the functioning of financial institutions;
7.2. the level of employment should be raised by stimulating
the economy, notably by increasing aggregate demand in order to
boost consumer spending, through greater public authority investment
in infrastructure and housing, and by stepping up education and
training for the unemployed;
7.3. markets and financial products should be made more transparent
to enable savers to be better informed about the risks incurred;
7.4. a sense of morality and ethics should be fostered among
economic and financial players, particularly with regard to remuneration
and benefits, and an ethical code of conduct adopted under which
they should operate; in particular, remuneration systems that foster
high risk and short-term profits should not be allowed;
7.5. there should be more active parliamentary control and
involvement of parliamentarians at national and pan-European levels
in order to monitor the application of rules and regulations;
7.6. improved rules governing the financial markets, including
rules of accountability, should be created so as to ensure better
coverage of the rule of law in this area;
7.7. there should be intense international co-operation between
the International Monetary Fund, the Basel institutions, the G20,
the central banks and the financial supervisory authorities with
a view to developing effective rules and an international framework
for the supervision of financial regulations; the international
financial institutions should develop effective early-warning systems;
7.8. the credit-rating system should be developed so that ratings
better reflect reality and the auditors of financial institutions
should more closely investigate exposure to risk;
7.9. off-shore tax havens should not escape appropriate financial
control;
7.10. governments should be reminded that despite financial
difficulties, citizens’ social, economic and human rights must be
safeguarded in order to avoid undermining the very foundations of
democracy;
7.11. economic measures should promote growth that is both economically
and environmentally sustainable; such measures should not lead to
a level of indebtedness that endangers new growth, nor should they
be in contradiction with climate goals;
7.12. governments must do everything possible to restore the
public's confidence in the functioning of the economy.
8. The Assembly considers it appropriate to ensure a constant
monitoring of the social impact and the human dimension of the financial
and economic crisis in the Council of Europe member states.
9. The Assembly emphasises that member states must also invest
in people in order to face economic and social challenges resulting
from the financial crisis. In a globalised and interdependent world,
human resources are a key factor for economic, social and democratic
stability. Therefore, the Assembly calls on the Standing Conference
of European Ministers for Education to develop educational policies
in view of these challenges and invites the Secretary General of
the Council of Europe to strengthen education in the Organisation’s
work programme.
10. Finally, the Assembly emphasises that in this time of crisis,
it is vital that economic solidarity, co-ordination and co-operation
be exercised not only among the Council of Europe member states
and between the industrialised states, but also vis-à-vis the developing
countries.