FRANKFURT (MNI) – Details of the Eurozone’s crisis resolution
framework, the European Stability Mechanism (ESM), must be finalized to
end damaging uncertainty, European Central Bank Governing Council member
Athanasios Orphanides said Wednesday.
While the main elements of the European Stability Mechanism have
been agreed, crucial details are lacking, Orphanides said during the
13th Annual General Meeting of the Cyprus Institute of Internal Auditors
in Nicosia.
“Because financial markets are forward-looking, the uncertainty
created by lack of clarity regarding the handling of future potential
crises has an adverse impact on the euro area today,” Orphanides said
according to a summary of the speech provided by the central bank of
Cyprus.
In this light, “public discussion of potential debt restructuring
by euro area sovereigns has been extremely damaging to the euro area
economy as a whole,” he said.
“The absence of an adequate crisis management framework for dealing
with fiscal difficulties in euro area member states have magnified the
costs of contagion throughout the euro area and become a major source of
instability,” Orphanides observed.
Orphanides argued that the current crisis largely reflects
“significant gaps in the Stability and Growth Pact” and “shortcomings in
the economic governance and crisis resolution framework in the euro
area,” which must be addressed urgently.
With regard to fiscal surveillance, Orphanides stressed the need
for improving the reliability of statistical reporting as well as
enhancing the monitoring of budget plans by setting up independent
agencies that would limit political interference and potential
manipulation, the central bank of Cyprus said in a summary of its
governor’s remarks.
–Frankfurt bureau; +49-69-720142; jtreeck@marketnews.com
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