Commissioner Rehn after the Eurogroup
Luxembourg 3/10/2011 : Commissioner Rehn after the Eurogroup:
"I will not hesitate to fully apply the new rules from 1st of January. And I expect the Member States to play by the rules so we don't have to face a similar crisis never again."
To summarize the picture, we face three major risks: stalling growth, stressed sovereigns and vulnerabilities in our banking system. We all agreed that it is essential to further substantiate our strategy to exit crisis. This is how I see this comprehensive response today.
1. Greece faces the moment of truth to avoid the collapse of its economy. As the Troika pursues its mission in Athens, I want to reiterate that full compliance with the agreed conditions is necessary to receive the funds it needs by end of this month from its international partners. The fiscal consolidation measures recently announced are important steps towards achieving the 2012 fiscal target. A credible push for structural reforms is also essential to restore competitiveness and reverse the negative growth.
2. Sound economic and financial policies must continue to be pursued at national level. This is the only durable solution to the euro crisis. Countries under strong pressure of the markets must continue taking credible measures and showing political commitment to public-debt sustainability. Furthermore, they must implement growth enhancing structural reforms to improve competitiveness and set the conditions for more and more sustainable jobs.
3. We need a more flexible and more powerful EFSF. Once ratified, the new EFSF will soon have access to new intervention tools, such as the capacity to support countries that, despite meeting their deficit and debt targets, still face huge pressure from the markets by purchasing bonds in the primary and secondary markets.
But that's not enough. We need to use its capacity more efficiently by optimizing it, we need to get more firepower out of it in order to provide effective firewalls against contagion and, if necessary, intervene to support the recapitalization of banks.
4. The reinforcement of capital in our banks must continue. Although European banks today are better capitalized than they were one year ago, lending to and between banks has dried up over recent months. Implementation of the first three elements that I just mentioned is a key requirement, as a main source of fragility in banks is their exposure to vulnerable sovereigns.