“Greece can exit the current aid programme in 10 months and be financed independently through the markets, if the government adheres to the agreed reforms to strengthen growth and employment,” Klaus Regling, head of the European Stability Mechanism (ESM), told “Le Figaro” on Friday.
“The first successful government bond issue this summer was a good indicator,” the ESM managing director said, noting that Greece’s progress was significant and it achieved a budget surplus last year, in contrast to a 15 pct of GDP deficit that it had presented in 2009.
The Eurozone needs an additional budget for cases of asymmetric financial shocks that would correspond to 1-2 pct of its GDP, or 100 billion to 200 billion euros. “For example, a hypothetical case could be that of Ireland, if the country needs capital while being exposed to a very hard Brexit. This would differ from a rescue with conditions, as we have done with Greece and other countries,” he noted. “We already have the means to reduce differences within the European Union; for example, transfers to poorer countries in the framework of the EU’s budget and the Juncker investment programme plan. These tools could be strengthened,” he explained.
Regling said that almost all EU countries support the founding of a European Monetary Fund to take over the functions of the International Monetary Fund in Europe, but no decision had been made yet in that direction.
He also said that the Eurozone needs its own finance minister, who will coordinate the economic policies of all member states and represent the EU at international organisations like the G20 and the IMF. “This, however, will surely take a few years to implement,” he added.
In terms of changes in the Eurozone, he said the priority was deeper banking union, but he noted that the EU was working on an “additional safety net” for banking crises. The European insurance of bank deposits would also be useful, he said, but Germany and northern Europe oppose it as long as the weakest banks don’t resolve their outstanding asset issues and further reduce the risks they face.