In his speech at the American Council on Germany, the Council for the United States and Italy and the French-American Foundation, Mr Regling argues that the ‘euro crisis’ was caused both by national governments’ disregard of budgetary rules and international financial market failures. The Eurozone member states have reacted to these flaws by setting up the joint European Stability Mechanism with a very robust capital structure. The ESM currently provides loans for macroeconomic adjustment programmes (Ireland, Portugal, Greece, Cyprus) and a financial sector assistance programme (Spain) in return for national budget consolidations and economic reforms. The European Commission, the European Central Bank and the IMF (‘Troika’) supervise these necessary adjustments. As of 2013, the programmes are working well, despite attendant problems to preserve social cohesion in the zone. Further steps are needed, such as the creation of a Banking Union for Europe and a Single Supervisory Mechanism at the ECB, which will allow the decoupling of bank debt and sovereign debt. Provided that the reforms will be continued, the overall outlook for a consolidated euro area is positive. Regling: “The crisis is not over although one can say that more than half of the way is behind us.”
Read the full text of the speech here