European Union must break out of ideological straitjacket

1660President of Iceland calls for honest examination of fundamental failure

The President of Iceland has called for an honest examination of the fundamental failure of political leadership, within European institutions, which has exacerbated the European economic crisis.

Speaking yesterday at London Business School’s Global Leadership Summit, President Grímsson said: “Like in many other times in European history, they [European Union leaders] are victims of an ideological prison.”

“What is lacking is the honest, intellectual, political, economic examination within the European institutions, of the fundamental failure, which the last four or five years has produced.”

According to a live poll at the summit, which was organised in collaboration with Deloitte and attended by 600 business executives, two thirds of business leaders agree. 66% said that European political leadership has exacerbated the economic crisis.

In his closing keynote at the debate on the future of leadership in the wake of the economic crisis, the President said: “I can’t understand why banks are being considered the holy churches of the modern economy.”

“Europe’s primary legacy to the world is not financial markets. Europe’s primary legacy that is given to the world, is democracy, the rule of law and human rights”, he said.

He warned against playing “financial roulette” on the global stage.

The President’s call for greater financial responsibility came during the summit where the need for reform and regulation in the global finance sector was robustly debated by business leaders including:

• Dr Josef Ackermann, Chairman, Zurich Insurance Group; Vice-Chairman
   of the Foundation Board of the World Economic Forum
• Martin Gilbert, Chief Executive Officer, Aberdeen Asset Management
• Paul Polman, Chief Executive Officer, Unilever
• Alessandro Profumo, Chairman, Monte dei Paschi di Siena
• Lucrezia Reichlin, Professor of Economics, London Business School
• Martin Wheatley, Chief Executive Officer, Financial Conduct Authority
• Tim Breedon MBA23(1987), Non-Executive Director, Barclays Bank PLC
• Julian Franks, Professor of Finance, London Business School

Linda Yueh, Adjunct Professor of Economics, London Business School, said:

“Five years ago the financial crisis transformed the way bankers were viewed. Certainly the macro-economic impact was significant and even now, there is a huge debate over whether or not the very slow recovery that we see in the western economies is due to the unresolved reforms, in the banking system.”

But, 46% of business executives still believe that self-regulation is the most viable way to regulate compensation in the financial services sector, paving the way for banks themselves to step up to the plate of honest economic examination.