Brussels, 12/05/2011 (Agence Europe) - Speaking in a European Parliament debate on Wednesday 11 May about the sovereign debt crisis in the eurozone over the past 18 months, EU Economic and Monetary Affairs Commissioner Olli Rehn warned about the cost of any default by Greece (see EUROPE 10376). He said that the people calling for a “restructuring” of Greece's sovereign debt didn't understand the catastrophic consequences such a move would have for Greece itself and for economic stability in general. Greek banks have lent the state €48 billion and would be devastated if half of the value of Greek sovereign bonds were written off, as some people are demanding, leading to much of the Greek banking system going bankrupt. The commissioner said he was not trying to defend the banks, but simply drawing attention to what would happen in practice - households would not be able to get at their cash and there would be unprecedented collapse of the economy - as has been witnessed in Argentina, where GDP had slumped after the country defaulted on its debt (after its debt was restructured), preventing the country from being able to raise funds on the money markets for a long, long time. The commissioner said the aim should be stability, reducing expenditure and paying the interest on the debts. Greece could follow Belgium's example, he suggested, which in the 1980s had demonstrated that such an approach could deliver results.
The Hungarian economics minister, András Kármán, said that there had been a spendthrift attitude to state expenditure and low competitiveness and hoped that the talks at the ECOFIN Council in June would reveal improvements in the member states' economic policies.
The MEPs recognised that it was not easy to know how to solve the financial crisis and most of them acknowledged the need to help struggling countries. On behalf of the EPP, Dutch MEP Corien Wortmann-Kool hoped an ambitious package of economic governance and reforms would be unveiled in June. Greek S&D MEP Anni Podimata said people should acknowledge the huge efforts made in Greece to reduce the deficit. Finnish ALDE MEP Carl Haglund urged EU member states to back Portugal without reservations. Portuguese GUE/NGL MEP Ilda Figueiredo described the austerity measures demanded by the European Commission, the ECB and the IMF as typical of colonial powers. British ECR MEP Vicky Ford was sceptical, saying that some countries had bailed out the banks using taxpayers' money and it was clear that they did not want to bail out other countries' banks. Speaking on behalf of the Greens/EFA, Germany's Sven Giegold criticised the delay in restructuring debt, calling for further action fast. This was echoed by Belgian Greens/EFA MEP Philippe Lamberts, who pointed out that the longer it was left, the tougher and more expensive restructuring would become, even for taxpayers. He said the way to solve the crisis was for people to take responsibility for it collectively, but it should not be at the expense of the weakest. How on earth can countries get so far into debt, wondered the UK's Godfrey Bloom (EFD), saying it was the fault of their leaders, who went around spending money as if there were no tomorrow. France's Marine Le Pen (NI) said that that Greece had not been bailed out the right way and it needed to leave the eurozone and return to a weak currency. This comment was immediately challenged by Luxembourg's Socialist MEP Robert Goebbels, pointing out that any country leaving the eurozone would suffer from a catastrophic devaluation of their currency because the purchasing power of the euro was 40% higher than the US dollar. Fellow Luxembourger Charles Goerens (ALDE) said it was a political rather than economic crisis and the comments made by the populists followed on from ideas expressed by some heads of state, who ought to understand that they are there to ease tension rather than fan the flames. Dutch MP Barry Madlener (NI) criticised the meeting of finance ministers from most of the eurozone countries in Luxembourg last Friday, to which the Netherlands had not been invited. (L.G.transl.fl)