BRUSSELS (MNI) – The Eurozone will end up with tougher fiscal
rules, despite what skeptics think, European Commissioner for Economic
and Monetary Affairs Olli Rehn said on Tuesday.

Earlier this month an EU task force led by European Council
President Herman Van Rompuy agreed broad guidelines for improving the
enforcement of the EU’s rules on debt and deficit levels.

Critics of the deal, including members of the European Central
Bank’s Governing Council, argue that there is still too much political
wiggle-room in the new pact and that it should include more automatic
sanctions.

“The Eurozone will end up with tough rules, semi-automatic
implementation, an effective framework to deal with broader
macroeconomic imbalances, and – yes – a permanent crisis-resolution
mechanism that encourages responsible lending policy by investors and
responsible fiscal policy by governments,” Rehn said, according to the
text of a speech delivered at a conference here.

Rehn said the Commission’s proposals to fine countries that do not
comply with the rules “amount to a great reenforcement of economic
governance.”

“It is now the joint responsibility of the [European] Council and
Parliament to move the legislative process forward without delays and
provide a final product that tackles the shortcomings in a credible
way,” Rehn added.

The European Union faces “a serious growth deficit,” he warned,
adding that governments should focus on reforms, but “finding sufficient
political backing for the necessary reforms is far from easy.”

“Many countries have taken bold steps in fiscal consolidation in
very difficult circumstances,” Rehn observed. “I don’t see why this
could not be extended to structural reforms and reinforcing economic
governance.”

The Commissioner said that the results of the G20 meeting in South
Korea last weekend were “encouraging”. Policy-makers there pledged to
reduce imbalances, but did not agree on specifics about how that would
be done.

“Global imbalances hamper the current recovery in many parts of the
world and reduce the potential for job creation,” Rehn said. “These
threats can only be tackled by a cooperative approach.”

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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