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22 July 2011

Sharon Bowles: Fire fighting summit goes in right direction but long-term eurozone health needs more


In her reaction statement following Thursday's meeting of Heads of State or Government of the eurozone, MEP Sharon Bowles, Chair of the EP economics and monetary committee, says real change is needed to consolidate the eurozone and not only fight the fires.

"I am hugely pleased at the doubling the terms of the loans to at least 15 years and reducing the interest rate to that of the Balance of Payment Facility, currently 3.5 per cent, essentially making this a cost-based loan. I have long campaigned against profiteering from the countries in the rescue programmes, which has also made the loans unsustainable. At last wisdom has broken out and it is a triumph that these terms are also extended to Ireland and Portugal.
 
The decision to allow the European Financial Stability Facility to purchase in the secondary market is also welcome. Again I have been calling for this for some time.
 
However, it must be clear that the conditionality and basis of decisions must not be discriminatory or improperly tie into other matters. A corollary of this is that the facility will need to be much larger - I have previously said €2 trillion; some other commentators have now worked up to €1 trillion.
 
The tie in of financial institutions to lending conditions comparable to those of public support is also welcome. We are all in this together and this is eminently fair. I wait to see what the credit enhancement entails. We must also recognise that rescues have consequential effects on investment behaviour, for example inadequate attention to credit quality. This may need to be taken into account in regulatory reforms and as part of a wider effort to get Western economies off the pattern of sovereign debt levels that growth cannot sustain."
 
For the long-term
 
"For the longer outlook, we have to keep in mind that a sovereign default, selective or not, is never good news and we must do whatever it takes to avoid a repetition of the current situation. Now, more than ever, we acutely need further reforms of our macro-economic governance framework to strengthen the long-term credibility of the euro: the summit announcement falls short of a long-term comprehensive solution. This is why the European Parliament welcomes the commitment to reach agreement on the voting within the preventative arm of the Stability and Growth Pact in the Economic Governance Package. The Polish Presidency and finance ministers across the EU know that I am 'open all hours' to discuss this.
 
Parliament will also keep a vigilant eye towards the way Member States take into account Commission's guidance in the context of the European Semester. Over the coming years, the needed courageous reforms to the EU's economies will not happen by watering down Commission recommendations.
 
Real change is needed to consolidate the eurozone and not only fight the fires. History has repeatedly shown that the Community method is the way to go for such real change. The cemetery of failed intergovernmental schemes is crowded and does not need another tombstone."

Reaction statement
 
  


© European Parliament


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