Brussels, 10/02/2009 (Agence Europe) - The economic situation of the eurozone remains “very difficult and very fragile” and, as Jean-Claude Juncker said on Monday 9 February, “we shall always consider that, despite a few improvements, credit is not in sufficient circulation”. This comes as no surprise and the challenges are “considerable”, he told the press after the Eurogroup meeting under his chairmanship. Although at this stage it is useful to contemplate new recovery plans, with the priority remaining implementation of measures decided, there is nonetheless an obligation to act with all speed and in a coordinated manner to settle the question of banks' impaired assets and to seek to attenuate the impact of the crisis on the job market.
Priority to implementation of measures decided. Economic packages are evolving along the lines of the principles defined by the European Council in December 2008 and, although some adjustments are sometimes made, “we see no immediate need to follow up the economic programmes with other efforts of the same magnitude”, Mr Juncker said. The positive impact on the real economy will be felt, at least gradually, the Luxembourg prime minister cum finance minister states. For now, indicators continue to underline the difficulty of the situation, although in January some data did show that the worsening noted over recent months had stopped. If this is confirmed, one might begin to see “we are at the lowest ebb”, said Economic and Monetary Commissioner Joaquin Almunia, calling for the considerable measures decided to be implemented (EUROPE 9835).
Employment market causes concern. The situation on the job market is “worrying” and will not improve in 2009, said Mr Juncker, who starts off by assuming that “unemployment levels will grow worse over the year 2009”. In this context, “resorting to immediate collective laying-off of workers is not a good method”, he said, calling on companies to use partial unemployment wherever possible. On the basis of a note from the Commission, the Eurogroup adopted a reference text recommending “targeted measures” of this kind to “help to limit employment losses”. Also, “the adjustment of working hours, in line with production needs can be an important source of labour input flexibility”, the text reads, considering too that “targeted training measures, combined with flexible working-time arrangements, may prove very effective”.
A strategy for restoring public finance. As deficits grow bigger and levels of indebtedness develop upwards, “we all agree in saying that, at a given time, we shall have to translate into more concrete decisions the idea that we must at all cost have a strategy for overcoming spiralling deficit and indebtedness”, Mr Juncker repeated. There will be no immediate definition of a goal for returning to budget consolidation but the subject will be tackled “in coming months, as we all want to respect the stability and growth pact (SGP) in both letter and spirit”, he added. When the Commission analyses the updated stability and convergence programmes (of which it received about 20) on 18 and 25 February, it will launch excessive deficit procedures in application of the rules of the SGP (Article 104§3 of the Treaty), a first stage along the road leading to budget consolidation.
Ways for dealing with banks' impaired assets. The Eurogroup discussion was largely on the question of dealing with toxic assets and more generally impaired assets, which banks should aim to get rid of. “Given the specific different national situations, we are approaching a solution”, Mr Juncker said. Although there must be a coordinated European approach, this will depend on the specific situations in the different member states and establishments concerned. “We believe that the different instruments one can conjure up to deal with them may be used in some countries and for some banks in specific situations”, Mr Juncker commented. “It is essential for some banks that we rapidly find a way to deal with the toxic assets”, as this may help financial stability, he added, anxious to determine how to find a common but differentiated way to proceed. The Commission takes the view that “one size does not fit all”, Mr Almunia confirmed, saying however that one must ensure conditions are the same for all and that state aid rules are abided by. Three principles must be taken into account to examine the value of assets (and hence to determine their possible purchase price). These, he said, are: - transparency in the method of assessment and the independence of those responsible for carrying out the exercise; - equal treatment, whatever technique is used (several options exist for dealing with toxic assets, including that of a “bad bank” structure), and; - adequate burden sharing between taxpayers and shareholders (mainly to control the impact of operations on public finance). (A.B./transl.jl)