In an exclusive interview with FRANCE 24, EU Commissioner José Manuel Barroso said slashing Greece’s debt was a good step toward economic recovery, but that growth was still needed.
European Commission President José Manuel Barroso hailed the eurozone debt deal on Thursday but said its implementation is still needed to rescue debt-hit Greece. In an exclusive interview with FRANCE 24-RFI on Thursday, Barroso called on member states and financial institutions to follow through on measures to write off 50% of Greek loans, as was agreed at a crisis summit earlier in the day.
At the end of grueling eight-hour-long negotiations in Brussels that continued overnight into Thursday, eurozone leaders struck a deal with private banks and insurers to write off half of Greece’s bond debt. Under the deal, the private sector agreed to voluntarily accept a nominal 50% cut in its bond investments to slice off €100 billion from Greece’s overwhelming €350-billion debt pile, cutting its debts to 120% of GDP by 2020, from 160% now.
“A lot was done, the results were rather impressive, better than expected frankly, but we have to concentrate on the implementation of the measures,” Barroso said.
The EU commissioner added that handing a lifeline to Greece was only a part of the deal. “The recapitalization of banks, measures to enhance the stability and growth perspectives, reinforcing governance in the eurozone – all those points were covered,” Barroso argued.
Getting back to growth
In return for the banks’ write-off, EU leaders agreed to re-inject public cash into the region’s banking sectors. The European Banking Authority has estimated that €106 billion were needed by banks. However, the International Monetary Fund has suggested more money was needed.
Under the latest negotiations, eurozone countries and the International Monetary Fund will also provide an additional €100 billion in rescue loans as a second bailout package for Greece. The country’s troubled economy is heading into a fourth year of recession, with unemployment at 16.5% and taxpayers struggling to cope with a barrage of new taxes on property, purchases and their shrinking incomes.
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Barroso said providing new public investment was also key to Greece’s recovery. “At the same time I am speaking about fiscal consolidation and debt reduction, I’m insisting to have measures for growth,” he told FRANCE 24 on Thursday. “Without growth we will not be able to overcome the current situation.
Eurozone leaders also agreed to boost their debt rescue fund, the European Financial Stability Facility (EFSF), to €1 trillion in order to provide risk insurance on new bonds issued by fragile governments in a bid to reassure investors and encourage them to continue to invest in them.
European countries also decided to appeal to emerging countries to help resolve their debt woes. A second fund, linked to the EFSF, will be created to attract private and public investors, including the likes of China and Russia. The investment vehicle might also be routed via the IMF.
‘Integrating’ economic policy
Barroso also said that the EU Commission would get serious about punishing member states that did not abide by economic agreements and commitments. “It is important to have a system of sanctions to be credible, but not only that. We need discipline, but also convergence and more integration.”
He said the 17 members of the common currency had already decided to meet twice a year to match their economic policies. Those meetings will be lead by EU Council President Herman Van Rompuy.
However, Barroso insisted that a common approach to solving the euro’s woes would require the participation of all EU countries – even those outside the eurozone.
“What I see now is a much greater awareness in our member states about the need to integrate more of their policies. This is indispensable. If we want to have a common currency, we can’t only have a monetary union, we need an economic union,” Barroso said.
Date created : 2011-10-27