Full statement by Sharon Bowles MEP, Chair of European Parliament’s economics committee, on Eurozone summit
Below is a statement from the Chair of the European Parliament's Economic and Monetary Affairs Committee, Sharon Bowles MEP, on the Eurozone summit.
Highlights
- The planned measures still fall short of a silver bullet - which in any case I doubt exists
- ECB remains an independent and powerful source of intervention
- Of the two options under discussion for the EFSF, neither has been tested on the market in this scale so this is a giant experiment and not without risk
- The haircut is not without consequences and stigma forGreece
"Europe has a track record of making progress through crises. We are now in the most serious manifestation of that, which offers both promise and risk.
"Immediate action plans to restore crucial confidence and prevent contagion revolve around the three issues of reducing Greek debt, recapitalising banks, and increasing the firepower of the EFSF.
"Together, these measures still fall short of a silver bullet - which I doubt exists given that policy mistakes not to streamline our economies or avoid asset bubbles have been made for many years. If implemented smoothly, they could however offer a sufficient period of stability which is essential for promoting growth."
Global effort
"The potential crisis is global and so global involvement is also appropriate in my view, whether via the IMF or other investors, given that everyone has a stake in stability. The ECB also remains an independent and a powerful source of intervention, capable of acting in a time frame that fits the market."
EFSF structure
"Concerning the EFSF enhancement options, maximising flexibility is key so that interventions can be tailored to specific countries and the needs and restrictions of their bond markets. Of the two options under discussion, neither has been tested on the market in this scale so this is a giant experiment and not without risk. The 'insurance' option has some similarity to mortgage and US department guarantees, whilst the SPV option has similarities with structured products. Despite popular sentiment going against such financial engineering, some such mechanisms have performed well through the recession, so they should not be discounted."
Bank recapitalisation
"Bank recapitalisation is long overdue - for a long time the European Parliament has called for this and for more realistic stress scenarios to be used. On this front more rather than less needs to be undertaken, as this is no time for half measures. In addition we in the Parliament have been calling for an EU resolution mechanism for banks for over a year."
Greece
"The Greek situation is in a separate class from other Member States and a large write down in debt is necessary. This is not without consequences and stigma for Greece so I do not see the risk that other Member States would be quickly lining up, also asking for haircuts. We must not however be naive and think that this alone will solve the trouble there. Greece's road to redemption will still be hard but at least it will stand a chance to tackle its deficit and reform its economy."
Revamping for the future
"Alongside this package of short-term stability measures, there are issues of greater economic governance and stimulating growth. The Parliament has consistently taken the view that EU economic governance decision making needs to be based on the Community method as far as possible. This is true also for the future ESM and therefore decisions taken by the ESM should be based on QMV and not unanimity. The Community method has a long track record, with the latest success being the Six-Pack. The intergovernmental one has not taken us very far over the last two years. A limited treaty change could also be a viable option."
ENDS