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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Remarks by Vice-President Olli Rehn at the Eurogroup press conference
4 March 2013
Thank you Jeroen. I will make four brief points on the issues we have discussed today.
First, on Cyprus. The agreement reached with the Cypriot authorities to proceed with an independent and bank-specific audit of the implementation of Cyprus’ anti-money laundering framework is an important step forward. In our view, this review is the most convincing means of effectively addressing persistent concerns about the rigorous implementation of this framework.
In parallel, the Commission will continue to work intensively with our partners in the Troika and with the Cypriot authorities with a view to concluding talks on a programme that can help to steer Cyprus though the difficult adjustment it is now undergoing.
I welcome the support of the Eurogroup to accelerate our work on the building blocks of the programme and we target an agreement to conclude this process in the second half of March.
In this context, I reiterate that we are working to find a solution which will safeguard financial stability and take into account the need to ensure debt sustainability and reduce the official financing needs.
Second, on Spain. Our second review has concluded that the Spanish financial sector programme is being implemented effectively. The commitments of the Memorandum of Understanding are being met, despite the ambitious deadlines, and thus the repair and reform of the Spanish financial sector is now well underway.
The recapitalisations made possible thanks to the programme, coupled with the transfer of impaired assets in the real estate and construction sector to the Asset Management Company, called SAREB, have helped to stabilise Spain’s banking sector. This, combined with financial market stabilisation, is an essential step towards normalising lending conditions for Spanish households and businesses, especially SMEs.
Third, on Ireland and Portugal. We are confident that Ireland will be able to graduate from its programme in the autumn, and that Portugal will do so in the spring of next year, as planned.
Nonetheless, the still fragile financial-market situation makes it essential that both countries remain committed to rigorous programme implementation, and that their European partners help to facilitate successful exits from the programmes.
The Troika will continue to examine an appropriate and credible extension of the maturities of the early EFSF and EFSM loans, with a view to smoothen the path back to durable market access. I hope that we can conclude this work and give a strong message of confidence at the next Eurogroup and ECOFIN meetings that will take place in Dublin in April.
Finally, I presented to the Eurogroup the Commission’s Winter Economic Forecast. The forecast showed that the necessary rebalancing process after the credit boom and after the increase in public and private debt will continue to weigh on growth and public finances for some time to come.
This justifies the differentiated approach to fiscal consolidation that the Commission is pursuing. It may also justify, in a certain number of cases, reviewing deadlines for the correction of excessive deficits, in line with the rules of the Stability and Growth Pact.
These rules specify that an extension can be granted if two conditions are met: first, the recommended consolidation effort has been delivered in structural terms and, second, unexpected growth shortfalls have occurred, having a major impact on public finances.
From the standpoint of rational economic policy making, this focus on the structural sustainability over the medium term is the appropriate approach, and it is the one we have been pursuing. We followed this line last year when extra time was granted to Spain, Portugal and Greece to correct their excessive deficits.
In parallel with the consistent commitment to sound public finances, Europe needs to tackle bottlenecks to growth by structural reforms and by improving access to finance. The excessively tight financing conditions, especially in southern European countries like Spain, Portugal and Italy, are hindering the flow of credit to households and businesses and thus suffocating economic activity and holding back export growth.
That’s why we need to complete the repair of the financial sector, in order to unblock private investment. This is not about "bailing out bankers", it is about letting credit flow to create growth and jobs.