President. – The next item on the agenda is the statement by the Commission on corporate governance and financial supervision in the Parmalat case.

Commissioner Bolkestein, speaking for the Commission, has the floor.

  Bolkestein, Commission. The Commission welcomes this debate and broadly supports the content of various draft resolutions tabled by Parliament. Whilst the facts are not yet fully clear, the Parmalat case is deeply worrying. It is the latest in a growing list of major financial scandals of various types – in various places – over the last few years.

The apparent size of this fraud is staggering, and the apparent complicity of a number of people from distinguished, liberal professions together with the failures of regulatory control are equally staggering. Scandal upon scandal will cumulatively weaken financial markets like the corrosive drip of a leaking fuel tank. Many sensible investors will pull out. Economic growth will be affected because the cost of capital will rise – the Enron affair has already shown that. So this matters to all of us.

My first point is this: the financial services industry had better get its act together, and do so quickly. We need some real industry leadership to stand up and take charge, to clear out the crooks, expose their unscrupulous practices and curb excessive greed. If industry leaders are not prepared to do this, then regulators will have to do much more than perhaps they or we would like. If that is the result, then industry leaders cannot winge about regulation from Brussels. They will have brought it upon themselves. Industry leadership is lacking at the moment, quite frankly.

Secondly – we already have a range of policies in hand which will go some way to improving matters in the future: measures in the Financial Services Action Plan – such as the Market Abuse and Prospectus Directives – which should be rapidly implemented; measures such as the new Investment Services Directive, which will help deal with some of the major conflicts of interest in the investment services business; the new international accounting rules which will enhance disclosure, along with the Transparency Directive – which we want adopted before this Parliament breaks for its elections. All these directives also enhance the powers of competent authorities to act and also to cooperate much more across borders. In my view, that means cooperating as well, in the same way, with foreign regulators – non-European regulators – in particular the SEC in Washington and also the Public Company Accounting Oversight Board in the United States. Capital markets today – as we all know – are global and regulatory cooperation must be global too to match them.

Thirdly, in March I shall propose to my colleagues in the Commission a revised Company Law Directive on the statutory audit function. It will strengthen controls over the audit profession in the European Union with independent oversight; strengthened inspection; stronger ethical and educational principles and high quality audit standards. These four aspects will be contained in the revised Company Law Directive.

As a result of Parmalat, the revision of the eighth Company Law Directive is likely also to include the following four elements: first, full group auditor responsibility for consolidated accounts of a group of companies; second, obligatory independent audit committees for listed companies – all 7 000 of them in Europe; thirdly, stricter auditor rotation requirements; and fourthly, strengthened sanctions.

I am accelerating work in three other areas in the Corporate Governance or Company Law areas in order to have proposals ready, if possible, later this year. They are the following three areas: the role of non-executive directors; directors' responsibility for company accounts; full disclosure in the company accounts of offshore special purpose vehicles, including the reason why the company uses those offshore structures and a much stricter verification by the group auditor of their content. We are also working hard on the issues of conflicts of interest of financial analysts and looking again at credit rating agencies. The Katiforis report is of considerable help in that regard.

Finally, the role and regulatory control of offshore centres need to be tightened. We are considering the options, although that is not easy. We expect to table in June the third Money Laundering Directive and we expect it to play a significant role.

To conclude, this is a very important debate. We support the main lines of this resolution. We are working, resolutely, in that sense. We still wish for strong industry leadership and an appropriate dose of ethics.

  Fiori (PPE-DE). – (IT) Mr President, Commissioner Bolkestein, the Parmalat affair is a systemic crisis because it was made possible by a world network of complicity and omissions, the key players of which were banks, financial institutions and external and internal control bodies, both public and private. I believe that the Parmalat affair gives a good indication of the negative aspects of the globalisation of financial markets, the internationalisation of which allows fraudsters to easily conceal and manipulate information. This shows how a necessary combination of transparency, efficiency and stability is all too often theoretical and, above all, fragile when faced with perverse desires rooted in a lack of ethics.

I am sorry to say that the Parmalat affair is similar to far too many financial scandals that have been portrayed in the news recently: WorldCom and Enron for a start. It is unpleasant and difficult to have to admit it, but something in the world balance has gone wrong and has dragged everything into the abyss, including uninformed savers and operators, who were supposed to be on the alert and prevent this from happening. We do not want to deal with individual responsibilities, nor should we have to, because this is not our job; our job is instead to undertake to prevent similar cases from happening again. It is essential to combat infringements and fraud in such a way that financial analysts will not then find themselves in a situation where they have to advise their own clients to make criminal investments.

Amongst other things, we have also looked over the Commission communication of May 2003 to the Council and to Parliament on modernisation of company law. In the motion for a resolution that we are presenting there are guidelines, which take into account the impact that the Parmalat affair has had and could have on its workers, savers, banks and the good operation of the financial system. It is our task to try to reverse this course, to try to protect the savings of millions of people and to regain the full trust of financial market investors.

It is essential that we learn from this case and react in an appropriate way by objectively assessing what happened, by making projections in future and by not just hastily looking for scapegoats. This is about establishing what did not work, what the inefficiencies of the provisions are, about proposing solutions to them, and providing for new public control powers.

We can have different political ideas on the aims of the regulation, on the production and distribution of income, but we must all agree on the fact that there must be no defrauding. Perhaps the crisis of legality is not just an issue of people but also of institutions, which are, perhaps, unsatisfactory. Perhaps the rules need to be looked at, re-thought and reviewed, and to do this we need to cooperate. The competent authorities for financial control of the different jurisdictions within the Union must cooperate. Cooperation is also called for with third countries; not just Europe but also the United States are part of this plan which is of primary importance. I also urge the Commission to monitor any new measure which concerns the role of rating agencies.

I will take the liberty of again asking the Commission to incorporate into the action plan on corporate governance measures designed to prevent conflicts of interests, whether they be those concerning investments made by banks or other financial institutions in listed companies controlled by internal stakeholders or, rather, those concerning cases of financial analysts who work for investment banks and advise their clients to invest in companies which are provided with profitable services by their bank. Furthermore, we need to make shareholders more responsible and more involved. Guaranteeing optimum transparency before and after transactions is absolutely necessary for investors in the field of financial instruments. It is, therefore, desirable that a European authority is created to – impartially – examine European financial markets and to look into cases with cross-border implications, along the same lines as the recent modernisation of European competition policy.

Furthermore, I call on the Commission to adopt a decision, as soon as possible, on the compatibility of Italian Government provisions with European provisions as regards the dairy sector in relation to the Parmalat case. Companies in this sector, the historic contributors to the Parmalat group have for some time been in a state of extremely serious financial liquidity, which could lead to a crisis for the whole company. If the request for help were to be deemed counter to the rules on free competition, it would be the beginning of the end for a sector that boasts tradition and is of undisputed quality at European level.

The Parmalat case calls for a great sense of responsibility, above all at our level, at European level. There are three areas where we must act. I believe that we have drawn up a well-founded report and that the next Parliament will certainly be able to engage in better cooperation with the Commission.

  Fava (PSE). – (IT) Mr President, our group appreciates both the speed with which the Commission has intervened on this particularly regrettable issue – especially for the Italian economy – and the sense of responsibility with which the Commissioner illustrated his proposals, which are urgent if the figures that we have to examine are genuine. EUR 15 billion represents a financial hole equivalent to 15% of the entire European Union budget. This is also the result of economic deregulation and of financial cynicism which – as Mr Fiori mentioned – many are guilty of. For example, major banks that betrayed the trust of their investors; international advisors, who often knowingly certified false accounts; monitoring bodies, which failed to monitor; and – if I may mention this, Commissioner – those governments that tolerate tax havens are also guilty. Many of these tax havens are controlled by Member States of the European Union. I will quote a few Italian statistics: 25 Italian companies control 400 off-shore companies; of these, 171 are based in Delaware, a small State in the United States of America, and 127 in Luxembourg, the nerve centre of the European Union.

So then, what are we doing here in Europe? I would like to propose, on behalf of Mr Imbeni too, an initiative to restrict banking secrecy. Nobel Prize-winning economist Joseph Stieglitz mentions how the use of banking secrecy is often one of the factors of economic instability, and the European Union is always appropriately preaching transparency. I do not, however, want us to bow down to any such idols. We could propose that the international community finally bring a moral dimension to globalisation and, therefore, propose a global agreement on banking secrecy, to which we commit ourselves, by seeking to propose a ‘Kyoto for banks’ – if you will allow me to use the metaphor – in the interests of a ‘financial ecology’ and to finally bring some ethics into the global economy.

Commissioner Bolkestein, you have realised – and you stated this – that the national control instruments are not sufficient: we urgently need global and supranational rules. We need to govern the financial markets and avoid conflicts of interest and perverse plots between banks and businesses. The European Union must swiftly look again at Community regulations, strengthen sanctions against fraud, intervene against the impunity of tax havens and lay down rules for the absolute independence of auditors.

Such an urgent and sensitive issue perhaps warrants greater attention from us – from Parliament and the Community institutions – and not a simple communication. We are not proposing a Committee of Inquiry but perhaps an investigation promoted by the Conference of Presidents – and therefore with the authoritativeness of a Conference of Presidents’ initiative – an investigation that is entrusted, in an informal and voluntary way, to a group of MEPs and that can continue beyond the end of this parliamentary term. Its function would be to investigate and put forward a proposal in order to understand what happened, how it could have happened and what needs to be done so that it does not happen again, to avoid future events similar to that of Parmalat.

Finally, Mr President, Commissioner Bolkestein, there are references in the Commission communication to shareholders, to the management, to relations between shareholders and the management, whilst there is little or no talk of the workers, who are the first to pay personally for the repercussions of tragic events such as that of Parmalat.

We want a strong voice to come out of this Chamber to protect, guarantee and support the thousands of workers – from Parma to Sicily – direct employees and those in allied industries, who today risk losing their jobs and salary. I believe that an ethical dimension to the economy, which we were referring to a short while ago by recalling how much responsibility also lies with governments and the European Union, now implies continuing to consider protecting and guaranteeing the right to work as a key problem.

  Riis-Jørgensen (ELDR). – (DA) Mr President, firstly, I want to thank Commissioner Bolkestein very much for his very clear, and clearly worded, speech. He could not have put matters better, for what we want to see are industrial leadership and ethical conduct – quite simply, proper behaviour. I am therefore very pleased with what we have heard from the Commission.

I also wish to say thank you for the action plan for corporate governance and company law. This had already been presented last year, and it is of course splendid that the Commission was, in this way, ahead of its time. It is also encouraging to hear about all the initiatives discussed by Commissioner Bolkestein today.

There is a need for that action plan, and there is a need for the Commission to put more resources into implementing it. Not only the Commission, but also Parliament and the Council must contribute resources, however. The unfortunate fact is that, on average, six to eight years elapse between a proposal’s being put forward by the Commission and its being implemented in all the Member States. A great many financial scandals can arise during that period of time, but, in its action plan, the Commission is repeatedly alert to issues of timing.

Good corporate governance is open, transparent corporate governance. Part of this is, of course, good accounting. Another important factor is that of board members’ collective responsibility for financial, and important non-financial, decisions. Moreover, there must be better rules for scrutinising the various group structures we find among companies. Certain companies are constructed in such a way as to cause observers to feel that they have been placed in the middle of a labyrinth, with no red thread to facilitate movement backwards or forwards. Such arrangements are untenable.

One thing we must not forget about is having a correct balance. It is no use repeatedly heaping rule upon rule and assuming that rules solve everything. The culture surrounding corporate governance is important. If the managing director is a scoundrel with criminal intent, rules do not help. It is no use putting unnecessary obstacles in the way of all the many honest companies. It is therefore important that what we agree upon is balanced and of help to everyone. Furthermore, investors must insist upon good corporate governance. The best means of implementing everything we are now discussing is, in spite of everything, the market. Pressure from investors is often the best incentive for sticking to the straight and narrow. All in all, then, we are on the right road. We just need to move up a gear and travel a little more quickly towards our destination.

  Ribeiro (GUE/NGL). – (PT) Mr President, the Parmalat financial scandal is a direct result of the monetarisation of the economy. This monetarisation is clearly excessive because the production and trade that meet the people’s material needs are drowned in the speculative waters of international high finance. Meanwhile the informal economy flourishes, along with the criminalisation of the economy, in which shady dealing becomes increasingly prominent, to the detriment of social and economic development.

This scandal is a further example of the pernicious effects of market deregulation and the unbridled movement of capital. Parmalat made use of every trick in the book: front organisations in tax havens, the benefits of special offshore regulations, hedge funds and forged documents and bills. This is how financial holes were concealed and tracks were covered, using complex structures and involving many subsidiaries, in order to carry out operations in the area of bonds and financial derivatives, with the assistance of international banks, cover-ups on the part of international auditing firms and rating agencies giving positive assessments. Thousands of jobs were put at risk, in the thirty-plus countries in which Parmalat operated, creating enormous difficulties for the thousands of milk producers who depended on the company.

This is no isolated case, however. In the past few years alone, a number of financial scandals have taken place – Enron, WorldCom and Merck, in the United States; Crédit Lyonnais, Vivendi, Ahold, Kirch, Marconi and Equitable Life in EU Member States – which have had a devastating social and economic impact.

Since this is a question of economic models, what is needed is greater stringency and tighter controls on financial derivatives, replacing mechanisms that are a product of, and whose raison d’être is, speculation. International efforts need to be stepped up to put an end to tax havens and to limit offshore operations. Financial instruments are needed to monitor the movement of capital, such as introducing effective taxation of stock market profits. What is most urgently required, however, is a return to the core values of production and labour. However considerable the problems of shareholders are – and they undoubtedly are serious – priority must be given to protecting jobs and to safeguarding workers’ rights and to ensuring their right to information, consultation and participation. In the case of Parmalat, compensation should be immediately considered for those milk producers affected.

I should like to highlight the negative contribution of the EU in terms of monetarisation, and, specifically, the Financial Services Action Plan, which encourages the deregulation, liberalisation and integration of capital markets together with the dismantling of prudential rules and control mechanisms. It worries me, Commissioner, that you say that hasty and poorly thought through legislation may exacerbate, rather than solve, problems of regulation illustrated by large-scale cases, such as Enron and Parmalat. In spite of your ideological concerns and your reluctance to take risks, we cannot ignore the evidence staring us in the face, or the urgent need to address these problems effectively.

  Jonckheer (Verts/ALE). – (FR) Mr President, Commissioner, I do not wish to dwell at length upon the drama of Parmalat – Italy’s eighth largest company – which, according to the latest estimates, is in danger of costing thousands of workers their jobs and the Italian exchequer some ten billion euros.

Echoing your statement, you have yourself observed that we had a joint resolution from Parliament on this subject. In the context of the various initiatives that you are announcing or that are under way, I should like to hear you say more about the responsibility you are going to have to assume as Commissioner and would ask you to tell us whether the proposals for directives you are preparing appear to you to be sufficient and commensurate with what is at stake, particularly on two points. First of all, I am keen, in response to my Liberal fellow-MEP, Mrs Riis-Jørgensen, to emphasise that rules are necessary because there are fraudsters. If everyone were honest, there would be no need for rules. Rules are needed, therefore, because of fraudsters, and rules that apply to everyone.

If we are to use directives as our instrument, we need extremely short transposition periods, and we need to make sure that all the Member States transpose these directives properly. At repeated yearly and half-yearly intervals, your own services prepare evaluation reports on the strategy for the internal market and do not fail to note that a good many directives are not transposed. I would therefore ask you if, in the case of subjects such as those we are discussing, legal instruments directly applicable to the Member States and without unduly long transposition periods might not be necessary. Otherwise, we shall be in danger of finding ourselves in the same type of situation in a year’s, indeed in two years’, time. On this matter, I consider that you and the College have direct responsibility when it comes to the choice of tool.

I now come to my second point, and I have to say that I again deplore the fact that the Council is not present – I do not understand why the Council is present on some occasions and not on others – for I have already questioned the Irish Presidency about what it intended to do in this area. In the Committee on Economic and Monetary Affairs, the Finance Minister was very evasive in his reply, saying that if people wanted to commit fraud, it was difficult to stop them, an opinion that I obviously cannot share.

Where off shore centres are concerned, Commissioner, why not raise the issue of effective international regulation within the context of the WTO negotiations? Indeed, the question has as much to do with world trade as with capital transactions. A number of countries are requesting new WTO rules where financial services are concerned. Do you not think that the European Union – the Council and the Commission – could take this debate to the WTO, where we have constraints in place? Within the FATF, the OECD and United Nations committees, we have for years been discussing the problem of regulating off shore centres and, not to beat around the bush, of abolishing tax havens. Do you not think that it is time to move up a gear, or do we still have to wait for another ten financial scandals?

Let me conclude, Mr President, by saying that, in my view, we have here a unique opportunity to show Europeans how useful the European Union is. The Parmalat case is genuinely scandalous, as is the fact that the political authorities are not doing more and doing it more quickly, a course of action in which I would therefore encourage you.

  Muscardini (UEN). – (IT) Mr President, Commissioner, the Parmalat case, like the Cirio case in Italy, the Enron case in the United States, or similar cases in Great Britain and France, is a sign of the crisis that has, for some time, been affecting multinational financial organisations. At the root of this is the huge and terrible gap between the real economy and the speculative bubble: a virtual wealth in paper form that hugely exceeds real wealth, based on production and on investments.

There is another common thread to the cases referred to: that is to say the lack of, or insufficient, control by the qualified institutions: central banks, stock exchange monitoring commissions, credit institutes, professional inspection bodies. It is not a coincidence that when savers and consumer associations place a question mark over these bodies, they always repeat the same refrain. They say that they were not aware of the true situation, that they were in the dark about such illegal rigging. Alternatively, these institutions lie or the monitoring rules are so flexible – and, therefore, not very precise – that it is possible to interpret them in such a way that they enable major fraud. In the first instance, this is done by savers/investors, maybe with the compliance of the banks themselves, a matter to which we have, moreover, already referred in several questions on the problem of the speculative bubble. Although we spoke about this long before it burst, the European institutions also paid insufficient attention to it on this occasion.

I am talking about compliance because a further fact that emerges from these cases is the conflict of interest suffered by credit institutes, always to the detriment of investors. In the preceding weeks, we had already presented a resolution to the Commission to get around the inadequate rules, in which we called for the initiative to be taken, at European level and for the purpose of protecting savers’ interests, to link all bodies charged with monitoring and controlling relations between businesses and banks and for an assessment to be made of the possibility of harmonising the current regulation in order to guarantee that ethical principles are applied, which means that inspectors must not be paid by those being monitored.

The notorious cases of illegality that are disastrously affecting the investments of hundreds of thousands of savers give us the opportunity to intervene on behalf of independent professional consultants – whom we have already spoken about in this Parliament – and to urge the Commission to look into the possibility of creating a European register of such professionals. On the one hand, to try to resolve the serious issue of the conflict of interest by reducing the banks’ monopoly on advice and, on the other hand, to aim for a high quality professional qualification based on ethics and on proven experience in the sector in question.

What we call for measures to support all Parmalat workers and to compensate savers that were defrauded, in some cases, twice – not only by Parmalat but also by those who advised them to make certain investments. We believe, however, that the Union must seriously face up to other potentially disastrous new consequences of the enormous gap between the real economy and the financial economy. Until measures are taken to reduce this gap, the risks will continue to loom.

  Borghezio (NI). – (IT) Mr President, setting up a Committee of Inquiry, which the European Parliament is calling for, could provide those useful elements that we did not find were sufficiently expressed in the motion for resolution, and give some specific and precise guidelines as to the instruments needed to prevent the reoccurrence of cases such as that of Parmalat.

We believe that five billion bonds were issued by Parmalat Finance, based in Rotterdam in the Netherlands, by a company with a modest capital of just a few thousand euro. In actual fact, they were not real bonds, but promissory notes, that some banks – including some very well-known ones – recommended from their counters to their clients – keeping quiet about their true nature which they could not, however, have not known about.

As regards better informing the signatories, specific rules need to be provided for: the forms should contain a concise description of the product, and our request is that they also contain a report on the risk factor, specifying the characteristics of the bonds, something that is not currently planned for.

There is still the issue of compensation. There is no point crying over spilt milk, we must think about recuperating the misappropriated sums and giving specific guarantees to savers in the case of collapse. Why do banks not have to respond directly and straight away when they have advised people, even shortly before a collapse, to buy ‘junk bonds’? In corporate meetings, shareholders can also have a role to play in terms of monitoring but, because this is effective, there must be provision for it to be obligatory to publish the minutes in an information pamphlet on the measure that is the subject of the meeting.

In the case in question, officials are already reporting huge difficulties in recuperating the sums, for example in US banks, because today US regulations allow US creditors to get preferential treatment. Genuine reciprocity therefore needs to be established between Europe and the United States in processes to confiscate assets and capital earned from activities involving financial crime.

In an economic democracy, which is achieved through worker participation, why not provide for an obligation to have a representation, with a monitoring function too, of workers/shareholders on company boards of listed companies?

  Villiers (PPE-DE). – Mr President, as we have heard, the Parmalat case was a catastrophe for its employees, for investors, for savers, for its creditors, for its customers and indeed for the financial markets. It is our duty as legislators and policy-makers to see how we should respond to that and to see what we can do to try and prevent that kind of catastrophe from occurring again.

How can we ensure that the whistle is blown on this type of criminal conduct before it reaches the catastrophic and disastrous proportions that it reached at Parmalat, before it goes on for years, as it apparently did at Parmalat? I appeal to the House to ensure that our response is proportionate, is measured, and looks at the facts of what happened in a dispassionate way, that we have a thorough analysis of what happened, of what went wrong – if anything – with the regulatory system, and of how we can improve the legal and regulatory framework to try to prevent a Parmalat from happening again.

We can be proud of the fact that this process started before Parmalat happened because, as people have said, there have been scandals throughout the world. Enron is the biggest, but there are others throughout the European Union. Few people were foolish enough to say 'well, Enron happened in the USA and we do not have any problems in the European Union'. If they said that they are obviously feeling rather foolish about it now, but that was not the general response here and in the Member States to the Enron crisis. We looked at what happened and responded to it. That will help us because we have prepared the ground to try to tackle a similarly disastrous event within the European Union itself.

As many people have mentioned, we need to look at the role played by the professionals – the bankers, the auditors, the ratings agencies – that were involved with Parmalat, to see if in the future there is some way of ensuring that they are not taken in, that they are able to assist savers and investors in detecting this kind of fraud, and that they are properly regulated; and to examine whether further regulation would ensure that they are better able to detect this kind of fraud. But we should not make the mistake of trying to turn auditors and lawyers and ratings agencies into policemen, because that simply would not work.

We need also to accept that the kind of obvious criminal and fraudulent conduct that we saw in the Parmalat case is something that can never be eliminated completely. No matter how effective and wide-ranging our system of regulation, you are always going to get fraudsters and criminals who will break the rules. We must focus on better enforcement of the rules and regulations that we have.

In many ways, that is a question for Member States. They need to devote many more resources to their police forces, particularly those specifically dealing with financial crime. That is one of the biggest lessons we can learn from Parmalat. We do not necessarily need to introduce a whole range of new regulation, which may in the end just prove to be a burden on those many market participants who are completely honest. We need more cooperation between our national regulators, not a single European Union regulator. The Member States should devote more resources to fighting financial crime and having a large, effective police force to fulfil that task in the future.

  Berès (PSE). – (FR) Mr President, Commissioner, ladies and gentlemen, following the Enron affair – and this is one of the points on which I agree with Mrs Villiers – a number of people in Europe thought that this sort of thing was a feature of American, but not of European, capitalism. Well, the Parmalat affair demonstrates that wayward developments of a similar kind are not alien to twenty-first century European capitalism. We are, in fact, confronting something with implications far beyond those of the Parmalat case and concerning the adjustment of tools that, in reality, we have not basically altered since the nineteenth century, whereas the nature of capitalism has, for its part, changed so much. In the nineteenth century, capital and labour were the opposing forces in companies. Since then, capital has dispersed and, with great ingenuity, has discovered a thousand and one ways of making its presence felt. Meanwhile, there is no European or world market for labour, which continues to rely on its strength alone.

We are concerned with four major problems: the issue of tax havens, that of the way in which capital is organised, that of the separation between financing and production and, finally, that of the fate of salaried and other employees. Nothing less. In this regard, I would thank you, Commissioner, for the proposals you are putting forward, for they are a small seed planted on the long road towards regulating world capitalism. That being said, I should like to emphasise two or three difficulties arising, in my view, from the proposals you have made. I take it that you do not share the view of Mrs Villiers, for whom the regulation of capitalism would require nothing more than having a policeman looking over the shoulders of every banker. As for myself, I agree with her on one point: there will always be scoundrels. There are, and always will be, scoundrels in the field of marine transport, and so too are there scoundrels in the financial sphere, which will never be rid of them. The thing is, not to give them a helping hand. At present, modern capitalism operates in such a way as to offer lifelines to the bad boys of the financial world. They take the form of tax havens, tax fraud and indecipherable capital structures. What we have the task of combating is this indecipherability, which prevents us from arresting those who are guilty. That is why we have to conduct a determined struggle against these tax havens by stepping up the pressure through every means at our disposal, whether it be embargoes or boycotts. If one country is boycotted because it does not respect human rights, why not boycott another for drawing a veil over fraudulent capitalist wheeler-dealing? It seems to me that this is worth thinking about.

Moreover, if there is a real desire to achieve transparency, a say must be given to those able to act as a counterbalance. Indeed, you cannot have ambitions to improve the way in which the operation of companies is regulated without granting more say to salaried and other employees. That applies to the debate we have had on Mr Katiforis’ report on rating agencies, and it also applies to the issue of the takeovers on which our Parliament has deliberated, not forgetting the issue of company boards of directors. On the latter point, it seems to me, Commissioner, that the document you have submitted to us, concerned with corporate governance, still falls far short of what we need.

In conclusion, I wish to point out that the life of companies is too important a matter to be left to financiers alone.

  Calò (ELDR). – (IT) Mr President, the Parmalat case is difficult to solve because we have not got to the bottom of the responsibilities and complex and ambiguous mechanisms that allowed it to happen. To consider it to be just an Italian scandal is a limited outlook. It is, in fact, an international affair of vast proportions, in which internationally important banks are involved.

The losses that savers have had to endure are, however, very clear to everyone. It is them that we must think about and we must look into, and encourage, the application of adequate measures, such as specific types of insurance, able to indemnify small-time savers involved in the collapse. Moreover, what has been described as the largest financial and accounting fraud ever registered in Europe dramatically highlighted the serious lack of rigorous and effective rules that are capable of preventing cases of the falsification of company accounts which, in accordance with a recent Italian law, have been decriminalised. It is essential that, in a common market such as the European one where the Treaties state that the constitutional principles of free circulation of people, goods, capital and services apply, the Commission intervene in order to give greater protection to citizens against this type of fraud, and that it does so through Community measures that are capable of stepping up the monitoring of accounts audits for Union companies.

This, however, is not enough. L'Italia dei valori, chaired by Mr Di Pietro and part of the Group of the European Liberal, Democrat and Reform Party, calls for strict rules to be established at European level to prevent any type of unfair economic or financial assistance at a company or individual level among companies active in the 25 Member States and structures operating tax havens in ‘rogue states’. In particular, a strict economic embargo, binding in this sense, would force the whole of the international community, including the USA, to act in an honest manner, so as to be able to prevent the reoccurrence of unfortunate episodes such as those that we have been talking about.

  Cauquil (GUE/NGL). – (FR) Mr President, for years, the boss of Parmalat had to use the same language to his 36 000 employees, scattered among thirty countries, as all bosses use to their workers. They had to be told that it was impossible to increase their salaries, that staff numbers had to be reduced and that this was required in the interests of the competitiveness needed. Well, the workers of this company have seen how crude these lies were. They see they have been duped. How many salaries could have been increased with the EUR 14 billion that their boss embezzled? How many supposedly necessary redundancies could have been avoided?

The last straw is that all those who have been complicit in these instances of embezzlement – the banks and administrations – will continue as before, while the company’s 36 000 workers are in danger of losing their livelihoods, and thousands of small dairy farmers are affected. Among the companies you claim are in the majority in behaving ethically and honestly, how many other Parmalats are there, however, that have still not been unmasked? How, moreover, is it possible to find out? How might people distinguish bosses on the make from those who claim not to be and, alongside the open gangster-style practices of the Parmalat bosses and of very many others, is it not, in reality, all large companies that engage in the hoodlum-like practice – legal in this case – of closing a factory by throwing the workers out on their ear, simply in order to make additional capital gains on the stock exchange? Your laws give bosses and boards of directors dictatorial power over their companies.

We are in favour of workers, consumers and the population being able to control companies, their accounts, the ways in which they realise their profits and the ways in which they use them. The community needs to be able to monitor companies on an ongoing basis and prohibit decisions that are clearly contrary to its interests. Tax havens do not exist only in the Bahamas. To abolish them here in Europe, banking and commercial secrecy needs to be abolished.

  Frassoni, (Verts/ALE). – (IT) Mr President, there are some cases where Europe is really needed, when swiftness of action is especially important and crucial in order to establish whether our institutions are really in a position to interpret the needs of citizens. This must be done in a visible and decisive manner. Of course, we are not the United States, Commissioner Bolkestein; our capacity for action is more limited, since it is restricted by national rivalries and various rights of veto, especially in those sectors that we are currently dealing with.

We believe, however, that there is room for manoeuvre in the case of Parmalat and the Commission must use this. Basically, we need to move in three directions, which have, moreover, already been mentioned. Firstly, the Commission must put forward proposals on the behaviour of companies when they operate in tax havens to hide their dirty money. We believe that EU legislation can be put in place to attempt to curb and prevent this, because this was indeed one of the fundamental causes of the events at Parmalat. This, Commissioner Bolkestein, goes far beyond a proposal on money laundering. I am afraid that, in order to genuinely be on the side of consumers and savers, especially in such a politically sensitive period, the Commission should formulate a proposal that visibly supports them and that – I repeat – goes far beyond the proposals that have been presented today.

Secondly, I would be pleased if Commissioner Bolkestein put forward a proposal to ensure that EU countries controlling these tax havens, that have access to them or that have particularly lax legislation in place on this issue, can be persuaded in some way to change course.

Thirdly – as my colleague, Mr Jonckheer, has already said – what does Commissioner Bolkestein think of presenting the position of the European Union on these issues to the World Trade Organisation?

  Angelilli (UEN). – (IT) Mr President, as fellow Members have already said, the financial collapse of the multinational Parmalat has constituted a very serious episode for Italy and has involved thousands of small Italian savers; it is likely to damage financial credibility and, in future, to create widespread distrust of our country amongst international investors too.

One of the causes of this financial collapse was, primarily the approval of the false financial statements of the Parmalat Group by one of the major auditing companies, which is alleged to have hidden the real asset situation of the company. What is more, it is obvious that the other bodies employed for financial auditing – Banca d'Italia and Consob – also failed to conduct the necessary inspections adequately and at the right time. Several of the most well-known credit institutes in global financial markets – both Italian and European – also appear to be involved in the affair; they issued an uncontrolled amount of bonds that are no longer redeemable.

For all these reasons, the Parmalat case has been described as the European Enron, although, in fact, it is more serious than the US scandal, since US GDP is much higher than that of Italy.

As we all know, the Parmalat collapse is, unfortunately, merely the latest in a long series of similar affairs that have occurred across Europe. So what can Italian citizens and European citizens, who are often the victims of this financial adventurism, expect? I think that they expect urgent and tangible measures, both to protect the workers in the Parmalat Group, which is the specific case in point, and – more generally – to safeguard and compensate the savers involved in this collapse. Furthermore, they expect instruments to be put in place to prevent operations of this sort occurring in the future and to restrict the maximum exposure of small savers.

Finally, I would like to draw the attention of the Commissioner to two final points: I think that the time has come to create an establishment for monitoring and control at European level – a sort of European Securities and Exchange Commission (SEC) – with the right to inspect and impose sanctions, under the direct control of the ECB, and designed to verify the efficiency and transparency of the equity market in order to protect investors as far as possible. Lastly, a black list should be established to ensure that tax havens are outlawed.

  Della Vedova (NI). – (IT) Commissioner Bolkestein, I welcome the initiatives that you announced beforehand and those that have been taken recently. Credit is due to you for declaring, right in the middle of the Enron affair, that Europe was not immune to that type of scandal. I would like to make it clear to everybody that the Parmalat scandal is not about a sound company destroyed by financial wrongdoing; unfortunately for Italy, the Parmalat scandal is a case of a fraudulent and inefficient business that someone tried to save through financial wrongdoing.

Today, quite rightly, we have been talking at length about controls. I think that the issue that needs to be faced is that of the role of central banks in individual States. Italy has given its central bank certain powers as regards competition, and therefore antitrust laws, and plays a fundamental role in the running of banking activities and, as a result of those banking activities, in the industrial system as a whole. I think that this is an anomaly that needs to be eliminated and that Europe, the European Central Bank, the Commission and the Council must take measures to that effect.

I also think that we have to act extremely cautiously, in response to the Parmalat scandal, when it comes to balancing controls and sanctions. It is all very well to increase controls, but we should not attempt to impose impossible restrictions on the financial market, which is crucial to Europe’s economic development. We are also looking at sanctions that, in the same way as controls, will serve to discourage fraudulent behaviour. In particular, we need to give consumers an important tool, class action, on the basis of Article 153 of the Treaty, which would be useful in discouraging fraudulent behaviour in any quarter.

  Lehne (PPE-DE). – (DE) Mr President, ladies and gentlemen, first we had Enron and WorldCom. Now, with Parmalat, Europe has caught a cold. The simple fact is that there are criminals everywhere. There are not only good people, there are also bad people, and we have made laws against bad people. Unfortunately, bad people sometimes break laws. That is why I do not see any point in reinventing the wheel now and considering yet again if we should perhaps forbid such things yet again. They were already forbidden.

What we need is a rational analysis to establish where there may have been shortcomings in the supervisory system and what scope there is for fine-tuning legislation. I am very grateful, especially in the light of the statements made by the Commissioner and the Commission's proposals, which we are already aware of, that unlike America we in Europe do not intend to overreact but that we are instead trying, by means of individual measures, to improve the existing legal position. Our objective is not to totally prevent such things happening in future – that would be impossible – but to make them less likely. I believe that the proposals made by the Winter Committee in the Winter II Report aim very much in this direction. The Commission's Action Plan on company law has taken on board the essence of the proposals made in the Winter II Report. I do not wish to go into detail, for the simple reason that the Commission's Action Plan on company law is being dealt with by means of a special consultation involving a separate report to Parliament.

I would just like to refer to two points, by way of example. I particularly welcome the fact that the Commission is now to bring forward the Eight Directive in the foreseeable future, but I believe that regardless of the many good ideas it contains, we should perhaps consider if certain aspects could not be made a little more consistent. I think it is outrageous that it will still be possible for audit companies to both provide consultancy and carry out audits for large quoted companies, in Europe at least. I stand by the principle that if you audit you cannot advise, and if you advise you cannot audit. It would not in any case affect the market at all, because the cake would remain just as big, it would simply be sliced up differently. Against that background I very much welcome the fact that legislative proposals drawn up in America will also have an impact on international audit companies operating over here in Europe.

In other areas I sometimes doubt whether the Commission's proposals make sense, for example the requirement in the transparency directive for mandatory quarterly reporting by companies throughout Europe. On that point I would just like to comment that companies like Enron, WorldCom and others all submitted such quarterly reports. Unfortunately, they were all false. That is why I do not believe that this instrument is really helpful. It is not a question of providing information overload, but one of obtaining the correct information that investors require for decision making.

I shall conclude on that note and thank you for your attention.

  Goebbels (PSE). – (FR) Mr President, Commissioner, ladies and gentlemen, in his ‘A Short History of Financial Euphoria’, John Kenneth Galbraith denounced the belief according to which, and I quote, ‘economic success and intelligence go hand in hand’.

The Parmalat affair is the perfect illustration of this because the founder of Parmalat appeared to have economic success. The financial world, the media and political circles were satisfied with the appearance of success, and neither the auditors, nor the bankers, nor the rating agencies, nor even the Italian regulators questioned the accounts published by Parmalat. The list of companies that have deployed, above all, their criminal intelligence to deceive euphoric financial markets has become extremely long in recent years.

From Enron to Parmalat, there is no end of apparently respectable companies that have ended up by massaging their accounts so as not to suffer setbacks on the stock exchange. All these financial scandals are the product of the belief, spread by the markets, according to which it is possible, at no risk, to become very rich in a very short space of time. Now, large profits are generally the result of taking large risks and, when the risks produce not profits but losses, there is a great temptation temporarily to hide those losses in order quickly to offset them by a profit based on still greater risk-taking.

By mobilising all the resources of financial engineering, losses are allocated to special vehicles, turnover inflated through phoney operations, such as Parmalat’s phantom sale of milk powder to the Cuban regime, and non-existent profits shown thanks to creative accounting. Faced with these scandals, the business world is still affected by the same short-sightedness.

I was Parliament’s rapporteur for the Directive on market abuse and insider dealing. In that role, I asked around in financial circles and received an impressive number of lobbyists. Often – in fact, too often – I heard, at that time, that Enron was only an isolated case and a product of the irrational exuberance of the American market, but that Europe was quite different. We now know that criminal energy is divided equally between the two sides of the Atlantic.

There is only one way of preventing financial scandals. Europe, the United States, Japan and all the important financial centres must cooperate. Transparency is needed, together with a constraining regulatory framework imposed also upon tax havens, offshore centres and other black holes of international finance. It is not a question of banning the Caribbean or Pacific islands from playing with the big boys and offering facilities to the business world, but of prohibiting the big American, European and Japanese banks from financing anything through bogus companies situated in unsupervised and unregulated islands, if these banks are unable to guarantee that these operations are lawful.

The tool for achieving this should consist of new rules governing the capital adequacy for banks, that is to say what is known in our jargon as the Basel II agreement. Conflicts of interest between the various supervisory and auditing functions etc. should also be avoided, but it is not a question of punishing the banks and other financial operators. Especially if we want it to have a social dimension, the market economy needs enterprising entrepreneurs and innovative financial circuits to fund them, but everything must be done to manage these markets in such a way as to ensure that employees, subcontractors, suppliers and shareholders do not become the victims of financial crime operating under the cloak of respectability.

  Andria (PPE-DE). – (IT) Mr President, Commissioner Bolkestein, ladies and gentlemen, the Parmalat collapse and other worrying financial crises before and after it have revealed the limitations of the rules governing our financial markets.

As happened in the United States, on the crest of the Enron affair, and in the United Kingdom, with its 34 defaulting scandals, in Italy too we immediately realised the need to introduce strict legislation in order to protect savers more effectively and – in a broader sense – to attempt to limit the discredit that would inevitably affect the financial market involved.

In these cases, though, we have to put aside emotional reactions and, in particular, we should not allow ourselves to be swayed by the appearance, however serious, of what has occurred and by the incentives that may result from it. Similarly, I do not support exceptional measures, such as the possibility of a monitoring super-authority, because we would run the risk of creating a new body that would have difficulty in making any additional contribution to an environment that must be restructured.

The measures in force have to be well implemented and certainly need to be redesigned. The bankruptcy law could also play a key role: the par condicio creditorum principle and the ‘suspect period’ should also play a role in both extraordinary administration and controlled administration. This would reinforce the protection of creditors. Furthermore, the credit system, which is certainly not entirely blameless in the case of Parmalat, would not be the sole arbiter of events. These would, however, be subject to the assessment of a designated judge.

So, to continue on the subject of far-reaching proposals, we would need to increase the information available on all financial products available to the public, both in ex ante prospectuses and in ex post communications, and to eliminate the problem of the patchiness of the information on the different financial products available to the public. Transparency monitoring must be extended to everything, including banking and insurance products offered to savers, which contain a management input. The introduction of stricter areas of incompatibility to protect the independence of inspection bodies will be inevitable. In the case of bond-issuing firms, however, more needs to be done: documents binding on the company will need to be issued, stating what the company will do, when it will do it and what investment products will be used. Above all, though, in addition to accounts auditors, we will need to put in place a figure that has already existed in the United States for ten years: the ethics officer. This figure, who acts as a form of listener, or identifier of signals, must be able to pick up on even weak danger signals that escape the attention of analysts, who focus on evidence. When reading the work of the ethics officer, it is possible to identify not only management results, but – on the outside – the extent of the firm’s reliability.

  Ettl (PSE). – (DE) Thank you, Mr President. Europe’s Parmalat affair is no less devastating than the WorldCom case, the biggest US financial scandal to date. Naturally, I am especially concerned because the Parmalat scandal also involved an Austrian company. We have been discussing European audit mechanisms and financial legislation ever since the major scandals started in the US some three years ago. Unfortunately, it is still the case that some people want more controls, and others want less. On this issue – this objective issue – there is very little middle ground; instead, what we have is, in my view, a farcical political polarisation.

Only yesterday, we were debating the issue of the ratings agencies. As usual in such situations, the conservatives voted against better and more stringent control mechanisms and thus accepted the audit and evaluation oligopoly as it stands, without particular comment. How should we view this situation from our perspective? That is a matter of taste.

We will soon have the opportunity to vote on the directive on cross-border mergers of companies with share capital. It is already becoming apparent that there is an intention to steer this directive away from workers’ interests and better control mechanisms. Yet the current financial regulations in the EU enable financial systems that lack transparency to pursue fraudulent policies. Tax havens continue to be maintained, even though there have for years been calls for us to regulate them. It is quite unacceptable for Europe’s regulatory and control mechanisms to have as many holes as a Swiss cheese, opening the door to fraud. If we fail to take action now, we will forfeit the confidence of the workers who are now losing their jobs, as well as the investors in the capital markets – confidence that we want to secure.

  Inglewood (PPE-DE). – Mr President, the Parmalat scandal comprises a series of quite distinct crises. Firstly, there has been fraud of gargantuan proportions; secondly, there is a systemic crisis in the market place, and, thirdly, there is a very considerable social disaster in Italy, where most of those affected are living.

I do not want to make any more remarks about either the fraud or the problems there may be in Italy. I would prefer to talk about its effect on the markets. We sometimes forget that one of the lessons of the twentieth century was the clear emergence of the evidence to support the view that markets are the best driver of prosperity and the best creator of jobs that we have seen in the world. It is therefore clear that the proper working of markets is essential to our collective future wellbeing. Those markets must be arranged so that criminality is difficult. However, just as it is impossible to organise the City of Strasbourg to make it impossible to be mugged, equally, it is impossible to organise the financial markets to ensure that there is no outside possibility of criminal fraud taking place. We should recognise that.

Secondly, it is important that investors have confidence in the market. The claims and evidence that companies produce about themselves should be transparent, and the rules about the way in which that information is put together should be unimpugnable. I welcome Commissioner Bolkestein's remarks on his review of auditing and auditing standards.

Equally, the governance of companies in the marketplace should be beyond reproach in terms of the way in which decisions are made. Again, I welcome the Commissioner's remarks in his statement. Furthermore, the claims that are made in the market and the advice that is given to possible participants in it must be such that there is no suggestion of impropriety. I must ask – and perhaps I say this as someone who is not standing in the forthcoming elections – can the same be said about the claims that the political parties are going to make in the forthcoming contest?

We must not forget either that even in the case of apparent large-scale losses by banks, it may well be that in a world where private provision of pensions is going to become increasingly the norm, it is the small people who get hurt by these disasters. It is the confidence of the small investor – either directly or through pension funds – which is so important for the workings of twenty-first century capitalism.

Many speakers have mentioned regulation. Regulation is the answer, but not over-regulation. That must be the lesson that we draw from this crisis.

  Bolkestein, Commission. I should like to begin by thanking Members of Parliament for their comments on what I said at the start of this debate, as well as for all other remarks made about this important issue. I would like to pick up on a few points at the closure of this debate in view of the importance of the subject.

Firstly, I should like to say something on a truly important aspect of this case: offshore tax havens and special purpose vehicles. The full complexity of the situation in the case of Parmalat, as regards the use of offshore financial centres and special purpose vehicles, still has to be clarified. It is clear that the time has come to introduce some real order here. All these types of special operations ought to be subject to three requirements: firstly, they ought to be listed in company accounts; secondly, the company concerned should explain its purpose – why does that company have these special purpose vehicles? – and thirdly, the group auditor ought to be made responsible for checking that what is supposed to be there really is there. There must be greater control over these highly complex corporate structures.

Along the same lines, the Commission will consider increased disclosure requirements in the context of the amendments to the fourth and seventh company law directives. These amendments are due to be adopted by September 2004. The question of the transparency of corporate vehicles and other legal arrangements is under consideration by the Commission, both internally within the European Union and also in the wider international context.

Secondly, I would like to say something on auditing. It might well be asked whether there is a systemic failure of the audit function; although I believe that the auditor has an important role to play in ensuring proper financial reporting, it is not the only factor under scrutiny. It is important to take a broader picture of the responsibilities for financial reporting and the functioning of capital markets. Apart from auditors, we should also question the role of management, of non-executive directors, of corporate governance arrangements, of credit rating agencies – as mentioned this afternoon- and of investment banks.

With regard to auditors, I believe there is a need for a stronger backbone to resist improper accounting and undue commercial pressure by the audited entities. Several measures that the Commission will propose in its forthcoming directive should help auditors keep their backs straight; for example, independence requirements, strong public oversight, communication with audit committees and serious external quality reviews.

We may also ask whether there is an accounting issue. Apparently, the existing legislation in Italy on annual accounts requires neither a cashflow statement, nor much information about financial derivatives and their impact on the financial position. The fair value accounting directive, adopted in 2001, has been in force since 1 January 2004. That directive requires detailed disclosure about financial instruments such as the fair value of financial instruments, information about their extent and nature, and a table showing the movements in fair value. Annual accounts, prepared on the basis of international accounting standards, which require a cashflow statement and also fair values, would have better reflected Parmalat's true financial position and might have prevented fraud, at least on the scale which occurred.

Then there is the question of corporate governance. Paragraph 7 of the resolution states that the political guidelines of the action plan on corporate governance are based mainly on transparency and disclosure. That is perfectly true, there are important transparency and disclosure initiatives, but the action plan also contains significant initiatives that are introduced via directives: it suggests appropriate and proportionate binding rules, for example on shareholders' rights and also on directors' liability.

Regarding independent directors, the action plan announces a recommendation aimed at fostering their role, at least on a comply-or-explain basis. It is therefore true that disclosure is key. But consultations on the action plan have shown that it is doubtful whether an approach based on binding rules on the composition and role of board committees would make much sense.

Lastly, to wind up this important debate, I should like to quote Mr Fava, who said that we need 'global rules'. I agree. It is not so easy to achieve global rules. Mention was made of the WTO: that is a possibility. The OECD does a lot of work in this area and we should be careful not to get ahead of ourselves. I should therefore like to support the OECD as much as possible in its work.

Mr Jonckheer said that this is a golden opportunity to show citizens what we are here for. He is right because, as many participants in this debate have said, it is the small people who get hurt first and who lose their pension rights or their jobs. We must make clear that the European Union is taking the necessary steps in order to put a halt to this kind of practice and the forthcoming parliamentary elections perhaps offer a good opportunity to do so.

Mr Jonckheer also asked whether directors will be up to the task. That is a very relevant question. Are the measures taken by the Commission, the Council of Ministers and Parliament sufficient? As Mr Lehne and Lord Inglewood have said, one cannot give any guarantees. It is impossible to give guarantees that something of this nature will not occur – guarantees only exist for vacuum cleaners! That is something we cannot do, but we can make it very difficult for people with ill intentions seeking to continue their work. We are a little bit between the devil and the deep blue sea, on the one hand between Mr Jonckheer, who says we should make sure this sort of thing does not happen any more and, on the other hand, Mr Della Vedova, Mr Lehne and Lord Inglewood, who say it is impossible to completely avoid criminal fraud. However, we can make it harder.

The actions undertaken by the Commission and by the European Union do indeed make it much harder for this sort of thing to happen again. I hope that all Members of this Parliament will join the Commission in making clear to the electorate that the Commission is doing its job and that Members of the European Parliament are also doing their jobs in order to prevent this sort of thing from happening again.

  Frassoni (Verts/ALE). – Mr President, it is just a question of clarification. Commissioner, at the beginning of your speech, you spoke about offshore banking and you listed some criteria. Does this mean that you are going to present legislation on that?

  Bolkestein, Commission. Mr President, as I said the key sentence is: 'It is clear that the time has come to put some real order here.' I mentioned three demands to be formulated: the special operations should be listed in company accounts; their purpose should be explained – why the company has them at all; and the group auditor must be responsible for checking. We are considering stronger disclosure requirements in amendments to the fourth and seventh Company Law Directives to be adopted in September, but I do not know whether those amendments are sufficient to control the whole business of offshore tax havens and special purpose vehicles. However, these three requirements which I have just formulated certainly must be met and we must find a way of doing this.

  President. – To conclude this debate, I have received six motions for resolutions from six political groups.⁽¹⁾

The debate is closed.

The vote will take place on Thursday.

IN THE CHAIR: MR PUERTA
Vice-President