FRANKFURT (MNI) – The Eurozone must continue on its reform path to
bring an end to the crisis, European Commissioner for Economic and
Monetary Affairs Olli Rehn said in an opinion piece published Monday
evening.
“To overcome the crisis and restore confidence, we must continue to
remove structural obstacles to sustainable growth and employment; pursue
prudent fiscal consolidation; and turn bold thoughts into convincing
actions when redesigning and rebuilding our economic and monetary
union,” Rehn wrote in the Financial Times.
“In short, we need to stay the course and pursue decisive reforms
in our member states and deeper integration in the Eurozone,” he said.
Rehn outlined the progress made in a number of countries, including
Ireland, Spain and Italy, but noted that the job wasn’t done.
“With Italian bond yields on the rise again after [Italian Prime
Minister] Mr [Mario] Monti’s decision to stand down, it is also a
reminder of the need to maintain resolve in the future,” he said.
Rehn also noted that, while much of the correction in imbalances
had come primarily from “in deficit countries”, there was also a case
for creditor countries to implement reforms and boost domestic demand.
However, adjustments made in creditor countries would not
automatically lead to increased demand for exports from debtor
countries, Rehn said, using Germany as an example to illustrate his
point.
“The principal beneficiaries of greater German demand would be the
central European economies closely integrated into Germany’s supply
chains. Our analysis suggests that a 1% increase in German domestic
demand would improve the trade balance of Spain, Portugal and Greece by
less than 0.05% of gross domestic product,” Rehn explained.
“This would not get us very far, which is why policies to enhance
competitiveness – both structural and cost-related – remain crucial for
the adjustment and rebalancing of the Eurozone,” he said.
— Frankfurt bureau: +49 69 720 142; email: twailoo@mni-news.com —
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