THE INCOMING EU economic and monetary affairs commissioner Olli Rehn has dismissed suggestions that Greece could be thrown out of the euro zone if Athens fails to correct the crisis in its public finances.
Mr Rehn was speaking in a confirmation hearing at the European Parliament. Greek finance minister George Papaconstantinou has said that a new plan to cut the budget deficit will be submitted to the European Commission early next week and should sail through without problems.
While Mr Rehn told MEPs that the ejection of the country from the single currency was not under consideration, he said the Greek government was aware of the seriousness of the situation and of the fact that its room for manoeuvre was very limited.
Citing an imminent EU review of the Greek government’s often-criticised efforts to stabilise the situation, he said the union faced “a very critical situation” with its budget deficit. “It is essential that rapid action is taken to avoid the situation getting worse.”
In line with suggestions from European Council president Herman Van Rompuy and Spain’s rotating presidency of the EU, Mr Rehn repeatedly stressed that the commission would deploy powers vested in the Lisbon Treaty to deepen and broaden its co-ordination of economic policy with “spine and rigour” to protect the nascent economic recovery.
Citing the fiscal troubles in Greece – which have led to a series of downgrades from rating agencies and to pressure on the bond spreads of other heavily indebted counties, Ireland among them – Mr Rehn said he wanted to toughen the commission’s preventative surveillance of EU economies.
Stating that he would study the actions of his respected predecessor Jaoquin Almunia and “follow his footsteps”, Mr Rehn said “most” EU member states had unsustainable levels of public debt and deficit.
One of the measures under examination to improve the public finances throughout the EU was to impose requirements on governments to maintain a particular budget surplus level when economies are performing well.
Mr Rehn said he would take a “fresh look” at eurobonds and other forms of project financing in the context of the powers of the European Investment Bank. “I said I would be willing to look at this with an open mind and with a fresh look.”
He added, however, that the creation of permanent crisis-management mechanisms would involve a major risk of moral hazard, rewarding bad behaviour.
He said Estonia was likely to be the next country to join the euro zone, adding that the commission would in the coming months assess its readiness to adopt the single currency.
- The global economy continues to recover from the worst recession in 70 years with "dynamic" emerging markets leading the way, according to top policymakers.
European Central Bank president Jean-Claude Trichet, who chaired talks on the global economy at a Bank for International Settlements meeting, said fiscal consolidation was essential for a sustainable recovery and for economic confidence. – (Reuters)
