–Euro-Zone ‘Delivering’ On 5-Pt Plan To Avoid Debt Crisis

By Steven K. Beckner

Rehn anticipated “a significant tightening of the fiscal stance” in
most member nations in 2012 and 2013.

He said “persistent tensions in EU sovereign debt markets, together
with the need to bring down currently high debt ratios to prudent levels
in most Member States, imply that fiscal consolidation remains the only
viable strategy to support economic stability.”

“In order to underpin their credibility, consolidation efforts
should be accompanied by growth-enhancing structural reforms and by
reforms that reinforce the sustainability of public finances in the
medium term,” he went on. “The speed of fiscal adjustment should be
differentiated by country according to their specific fiscal and
macrofinancial circumstances.”

Rehn asserted that all member countries “should continue to respect
their commitments according to the rules of the Stability and Growth
Pact, which allow the automatic stabilisers to work around the agreed
path of structural fiscal adjustment, while ensuring the long term
sustainability of public finances.”

“Given their particular situation, Member States benefiting from a
financial assistance program should stick to the targets as agreed in
their programme and should fully and timely implement the policy
measures, including in particular structural reforms, agreed in the
respective Memorandum of Understanding,” he declared.

“Similarly, Member States facing close market scrutiny should
continue to meet the agreed budgetary targets and stand ready to pursue
further consolidation measures if needed,” he added.

Rehn said the EU is also “strongly committed to put all major
financial reforms in place by 2013″ and noted it has already adopted new
rules for OTC derivatives and is working on implementing Basel 3 capital
standards.

“We have draft legislation on table on credit rating agencies, both
to reduce undue reliance on them and to regulate them more effectively,”
he said.

But Rehn said “a key outstanding area” yet to be accomplished is
“establishing effective recovery and resolution regimes.” He said the EU
is “committed to adopting an EU framework for resolution in line with
the FSB key attributes.”

Rehn said “international cooperation will be critical in ensuring
the longevity and sustainability of financial reforms and, therefore, of
financial stability. International cooperation and coordination are also
key to ensuring that global differences are minimized; eliminating
opportunities for regulatory arbitrage; and maintaining a level playing
field.”

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** MNI Washington Bureau: 202-371-2121 **

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