Rehn: Financial crisis contaminates core of eurozone

Commissioner expects increase in capacity of temporary finance facility

Olli Rehn

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Olli Rehn, the European Commissioner for Economic and Monetary Affairs, is calling for quick decisions for the solution of the financial crisis affecting the eurozone.
      Speaking in Helsinki on Thursday, Rehn said that slow movement will not work. “Ahead of us we have either the slow disintegration of the entire eurozone, or the strengthening of the economic and monetary union.”
      According to Rehn, plans to increase the lending capacity of the European Financial Stability Facility (EFSF) is in its final stages, and decisions could be forthcoming already next week at a meeting of the economic ministers of the eurozone.
     
Rehn pointed out that the Commission proposed already in January this year that the lending capacity of the EFSF should be expanded, but this proposal was rejected at the time.
      “The solution that was finally approved at the October summit was close to the Commission’s original proposal. I dare say that if the decision had been made early in the year, we would not be in such a deep swamp now.”
     
Rehn feels that the sharp increase in interest rates on loans in Finland and Germany indicates that the “contamination effect” of the debt problem of the crisis countries has spread into the hard core of the eurozone, comprising the countries with the best credit ratings.
      Rehn feels that handling the acute phase of the crisis requires quick decisions to increase the size of the stability funds. A stronger EFSF and the permanent European Stability Mechanism (ESM) will form a credible firewall against market upheavals, he says.
      “The European Central Bank has had a central role in handling the crisis. It has also taken exceptional measures to secure the stability of the financial system. I trust that it will continue to make wise decisions within the framework permitted by the fundamental treaties”, Rehn said.
      “As part of reform in the long term we might make use of some kinds of joint bonds of the euro countries. However, an absolute prerequisite for them must be the strengthening of Monetary Union.”
     


Previously in HS International Edition:
  Rehn: Europe teeters on brink of recession (11.11.2011)
  Rehn expects agreement on ways European countries can support beleaguered banks (10.10.2011)
  Rehn: new recession can be averted (26.9.2011)

See also:
  Olli Rehn – Finnish Commissioner in the centre of the crisis (22.11.2011)

Helsingin Sanomat