Cicero Policy Briefer

Issue 24, May 2008

Financial Education in the EU

By Michael Cooper

As the FSA grapples with the National Strategy for Financial Capability, it is not alone-the European Commission is determined not to be left out of such a key policy facing Western economies and which has been a contributing factor to the current financial turmoil.

As with policy discussion in the UK around the scope and provision of financial education, while there may be headaches for European policy makers, one of the key principles on which there is unanimous agreement is that financial education needs to begin at a young age, forming the basis of a lifelong programme to improve citizens’ understanding of financial products.

Financial capability is a key message in the EU’s current political landscape-in a previous article I explored the recently adopted Consumer Credit Directive which looks to improve citizens’ understanding when comparing credit products. This latest round of efforts stems from the Communication on financial education at the end of last year, which laid out the principles to which educators should adhere.

To a certain extent the Commission’s hands are tied in how far it can push its education agenda forward as under current Treaty provision, this power resides at Member State level. As such the Commission is having to be creative in how it can help facilitate efforts to improve financial education and thus the effectiveness of policy areas it does have control over, such as consumer credit.

With this in mind, the Commission is set to launch a €1m project which looks to extend Dolceta (Development of On Line Consumer Education Tools for Adults)—an online educational tool which is currently marketed towards adults-to help teachers of primary and secondary school children to incorporate financial education into their lessons.

The website (www.dolceta.eu), which provides information to citizens on their consumer rights and financial services, addresses is sue s such as how to pay back a mortgage and how to calculate interest. It will be tailored to a younger market by placing greater emphasis on the basics of finance, including how to open and use a bank account. This particular initiative is set to run for two years and will run alongside similar efforts from the Commission to brush up financial knowledge among students which include free educational kits and lesson planners for school teachers.

While the budget is not enormous given the lack of direct influence the EU has in this field, this may be of great use to Member States who are struggling to address the is sue of financial education in schools. For those members, such as the UK, which have already set in motion such programmes, there may well be some head-scratching as to why the Commission has decided to intervene. Certainly the integration (or lack of it) in the single market is due to a number of disparate factors, from tax issues to employment legislation, but the Commission surely is struggling to justify the need to create harmonised financial education in schools. Whether it is a case of sticking their oar in is to be debated.

Michael Cooper can be contacted on +44 (0)20 7665 9530 or click here to email.