Nikkei Veritas Article 7th August 2011

Please see the attached scan of a recent article in the Nikkei Veritas. The translation is as follows:

EFSF Bonds to become Eurobonds - Interview with Mr Graham Bishop, EU Financial Consultant

Q: What is your opinion on the results of the eurozone summit in July?

A: Aside from temporarily dealing with Greek debt crisis, little has been done to fend off meltdown, and judging from interviews with French President Sarkozy, important decisions have been put off till October.

Q: There is a concern for chain reactions to Spain and Italy?

A: Spain as a nation is well aware of the need for drastic measures to shore up its fiscal health. While Italy is making progress on deficit reduction, it faces decline in economic competitiveness. Both countries need to convince the market that their fiscal recovery is in order. Otherwise fiscal consolidation will become difficult if yields on the sovereign debts stay at the recent peak.

Q: Will Spain and Italy need support? 

A: Last year, I wrote a book titled “The EU Fiscal Crisis: Forcing Eurozone Political Union in 2011?”. I hope the question mark is removed within this year. I proposed a system of operating on the eurozone-wide economic policy, monitoring labour and economic policies as well as dealing with sovereign debt. EFSF and its successor, the European Stability Mechanism (ESM), will extend financial support to the member countries in exchange for accomplishing their policy commitments. This will enable Spain and Italy to lower their interest rate cost.

If Spain and Italy face difficulty raising funds in the market, the size of the EFSF fund may need to be increased to €1 trillion. If most member countries access the EFSF, EFSF issued debt effectively will become common eurobonds.

Mr Bishop was talking to Akio Fujii, Editor, European Bureau.