Speaking at the ECON Committee, Rehn reviewed the financial assistance programme in Cyprus and suggested that there were four lessons to be learnt.
The financial assistance programme will support Cyprus in correcting the excessive economic imbalances from which it is suffering. Its key objectives are to restore the viability of the banking sector through deep restructuring, to ensure the health of public finances, and to create the conditions for recovery of growth and job creation.
The programme aims at ensuring a smaller but resilient and transparent banking sector. Reforming the legal framework for anti-money laundering and ensuring its effective implementation is a key element in this respect, and a necessary condition for ESM funding. In terms of fiscal policy, the programme allows Cyprus to eliminate the excessive deficit over a period of four years.
The programme also outlines a comprehensive agenda of structural reforms in order to create the conditions for the renewal of the Cypriot economy, building on its strengths, such as its well-educated and skilled labour force and tradition of entrepreneurship.
The Commission stands by the Cypriot people to help them through these tough times and to rebuild their economy. We will provide technical assistance to Cyprus through a Support Group. I trust that we can count on your support in mobilising the available resources for Cyprus, as quickly and as effectively as possible.
In conclusion, I would suggest that there are four lessons to be learnt.
First, there must be absolute clarity about secured deposits. In this respect, the Eurogroup and Cyprus took rapid corrective action and underlined that secured deposits indeed are secured in Europe.
Second, we need a banking union to prevent the development of unsustainable banking sectors like in Cyprus.
Third, when it becomes inevitable that a country is in need of financial assistance, it is essential that action is taken as soon as this is recognised. Delays are very costly to the economy and society.
Fourth, we have to recognise the structural problems of our decision-making in the area of economic and financial affairs. This calls for the completion of the Economic and Monetary Union, which should bring the current inter-governmental arrangements into the Community framework and strengthen the external representation of the euro area.
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