Prodi pleads for calm over share prices as EU stays in good shape

Date: 25/07/02

By Peter Chapman

COMMISSION President Romano Prodi has urged calm amid the growing crisis in world stock markets, issuing a positive health report on the state of Europe's economy.

'The 'real economy' of the European Union is in good shape. Our companies are healthy, our key economic data are sound. The fundamentals are good,' Prodi told reporters yesterday (24 July).

However, he admitted that the unsettled state of financial and stock markets was 'a cause of concern' and that serious corporate governance problems in the US required 'careful attention'.

Prodi said the EU was well-served by its existing rules for corporate governance and their implementation by the authorities.

But he warned that they 'must be adapted to the scale of the European Union's internal market, soon to be enlarged to take in up to ten more countries, and to the seriousness of the challenges facing us'.

His comments came as European stock markets continued to plunge in the wake of the series of financial disasters to hit corporate America.

Later, the Commission's financial services chief, Frits Bolkestein, stressed that the EU was setting the right policies to address fears that corporate collapses in the US could be mirrored in the EU.

Speaking the day after a behind-closed-doors meeting with senior European industry executives, regulators and market experts, he said: 'We are doing what is necessary. We have achieved quite a lot, and we will be doing more.

'So far we do not have any indication that something on the scale of Enron or WorldCom is happening in Europe. But one can never be sure and we won't be complacent.' He said the Commission's legislative programme was 'massive' in vital areas of financial rule-making and predated the current crisis.

It ought to be sufficient to reassure investors that the Union 'is prepared for and is preparing itself even better for the sort of unfortunate happenings that occurred on the other side of the Atlantic', he added.

But Bolkestein admitted it might not be easy for policy-makers to convince markets to bounce back.

'Investor confidence is a difficult issue. There is a Dutch expression that says 'confidence comes on foot and leaves on horseback' and we are faced with such a situation. The EU is powerful but it has no power over stock markets,' he said.

• Bolkestein and Harvey Pitt, the embattled chairman of the US Securities and Exchange Commission, are expected to meet in Brussels on 10 October at a conference organised by the UK's Institute of Chartered Accountants.

Following their last meeting in May, Bolkestein stepped-up his campaign for the US to follow the EU's lead and adopt international accounting standards.

Pitt has been under pressure to quit in the wake of inquiries into Enron and WorldCom.

Commission President Romano Prodi has urged calm amid the growing crisis in world stock markets, issuing a positive health report on the state of Europe's economy.