Brussels, 14/06/2010 (Agence Europe) - A strong euro partly concealed the budgetary problems of the euro area member states, which had not paid enough attention to them since the launch of the single currency. That was the criticism levelled by European Council President Herman Van Rompuy in an interview which appeared in the Financial Times of 14 June. While highlighting the harm caused by member states' failure to comply with the rules of the Stability and Growth Pact and, more generally, the lack of reforms in Europe, Van Rompuy was also critical of the attitudes of the markets.
“What went wrong wasn't what happened this year. What went wrong was what happened in the first 11 years of the euro's history. In some ways, we were victims of our success,” Van Rompuy says. “The euro,” he goes on, “became a strong currency with very small interest rate spreads (Ed: on government bonds). It was like some kind of sleeping pill, some kind of drug. We weren't aware of the underlying problems”. The awakening has been rude. “The toughest thing now is reforms in the budgetary field and the economy - competitiveness, labour market reforms, the retirement age,” Van Rompuy says, but he goes on, “Of course, it will be difficult. At certain times, there will be political unrest and political opposition to all this. But I know most of the leaders now. They are preparing to take huge risks because they know what is at stake for the eurozone”. In the same way, the markets must not overreact, he adds.
“The markets were too indulgent in the first decade, but now they overreact a lot of the time to small incidents,” he argues. “Most of us are not happy with the excessive market developments”. When looked at in a broader perspective, however, the markets are penalising bad policies, “sometimes excessively, disproportionately and based on rumours and prejudices,” he adds. The Council president repeated, too, that European states should not rule out amending the European treaties to strengthen the Stability and Growth Pact. “There is no taboo on it. But for the now, we are working within the framework of the existing Treaties,” he states, adding that, “if there is consensus on treaty change, I will not oppose it. We are in one of the most difficult situations you can imagine. So, to exclude certain solutions would not be wise”.
European Commission President José Manuel Barroso also reminded Europeans of the work that remains for them to do. “Our priority is putting order into our public finances,” he told press following a meeting with German Chancellor Angela Merkel in Berlin on 11 June. “We need budgetary consolidation and a new financial stability culture in Europe,” he argued. He went on: “There is a new awareness in Europe that rules have not been respected and must now be respected” since “circumventing the rules is not a 'Kavaliersdelict' (trivial offence). It is putting at risk our collective economic future. We need to move in the opposite direction. We need to strengthen our rules and the way the EU runs its economy”. (A.B./transl.rt)