Commissioner Barnier: The solution to the sovereign debt crisis is not less Europe but more integration
16 January 2012
Speaking at a conference in Hong Kong, Barnier stressed that the current debt levels must be put into perspective. In 2010, public debt in the eurozone amounted to 85 per cent of GDP. This compares to more than 100 per cent in the US, and nearly 200 per cent in Japan.
We must not deny that the situation is serious. The economic recovery, which was well underway, has almost come to a halt. There are some positive signs but economic activity is generally expected to stagnate in the coming months. According to our 2011 autumn forecast, growth could fall to 0.5 per cent in the euro area in 2012.
The sovereign debt crisis has spread and is spilling over into other markets, in particular the interbank market. We need to avoid another large credit-crunch and disastrous consequences for the real economy.
First of all, the sovereign debt crisis: To deal with it, there is a need to act on many fronts simultaneously:
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We are providing strong financial assistance to Greece. Greece is an exceptional case and requires exceptional measures;
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We are strengthening European banks. The biggest banks are being required to create a temporary buffer of 9 per cent of the highest quality capital by the summer. And medium-term funding will be ensured through guarantees on bank liabilities. For the first time ever, the European Central Bank also recently stepped up its response to the eurozone crisis by providing €489 billion in three-year loans to more than 500 European banks. This move comes ahead of a crucial first quarter of 2012 for the eurozone. Indeed, a large volume of bank debt is due for refinancing;
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We have also agreed on a European Financial Stability Fund with a lending capacity of €440 billion to help countries facing difficulties. We are currently working on different mechanisms to maximise the capacity of this fund.
Second, we must continue to act on our global commitments to financial regulation. Because financial markets are global. And differences will be exploited putting all these markets and our wider economies in peril. In a few weeks, the European Commission will have tabled all 29 texts of its financial regulation agenda, translating G20 commitments into European law.
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First objective: reinforcing stability and improving the governance of financial institutions;
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Second objective: improving financial markets' effectiveness, integrity and transparency;
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Third objective: enhancing consumers' and investors' protection;
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Last objective: a framework for crisis resolution for banks in Europe.
Full speech
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