In a speech delivered at the London School of Economics, van Rompuy commented that excessive debt is a problem that has hit a number of countries across the world. But its existence in some eurozone countries has had an impact right across the eurozone, and indeed the single market.
The following comments have been extracted from the speech:
We have discovered that three countries, representing about 6 per cent of the GDP of the euro area, could threaten the financial stability of the eurozone, as well as the stability of the banking sectors in all Member States. Lack of financial oversight played its role. But clearly, the financial and monetary interdependence had been hugely underestimated. Without the fiscal irresponsibility in some countries, there would never have been a crisis in the eurozone. It may be useful to remind you that when the crisis erupted, we had to start from scratch. There was a complete absence of appropriate instruments. There was even an interdiction to take certain types of action (no bail-out clause). Politically, it was also difficult to act, both in the debtor countries, which had to accept reform programmes with strict conditionality, and in the creditor countries, who guarantee the loans.
Nevertheless, since May 2010, we did establish a completely new economic governance framework, including a support mechanism for countries in difficulty. Recently we made the latter more flexible, while assuring the right conditionality. What we have put in place is a multifaceted reform. People who only focus on one or another aspect, and rush to denounce them as insufficient, miss the overall picture and the interactions between the elements.
Speech
© European Council
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