VILNIUS: Eurozone finance ministers warned against complacency yesterday as the economy recovers from a record recession, insisting the return to growth does not mean that painful reforms can be relaxed.
The bailed-out countries especially must stick to their targets, with no compromise, even though it is expected some such as Greece need further help. “The economic outlook is improving,” said Jeroen Dijsselbloem, head of the group of 17 euro finance ministers after a meeting in Vilnius.
A return to growth after an 18-month recession is welcome, Dijsselbloem told a press conference, but unemployment stuck at 12 percent “is still too high”.
“We need to carry on with all our policies with strong resolve,” he said, citing controversial reforms which allow Brussels to vet national budgets before approval to ensure they meet EU rules on the public deficit and debt.
“Complacency ... is simply a luxury we cannot afford,” EU Economic Affairs Commissioner Olli Rehn commented.
Dijsselbloem said the Eurogroup of finance ministers would hold an additional meeting on November 22 to review the draft budgets submitted to the European Commission, the EU’s executive arm which will police the system.
Nearly all member states have breached EU deficit and debt rules by a wide margin, made worse by the costs of the debt crisis, especially the rescue of failed banks, a major talking point at the meeting. Dijsselbloem said the eurozone was making progress toward a ‘Banking Union,’ the new regulatory regime meant to prevent a repeat of the crisis.
A key step was taken on Thursday when the European Parliament approved setting up the Single Supervisory Mechanism, the first pillar of the new system which will be followed by a Single Resolution Mechanism to wind up failed banks.
After that will come a Deposit Guarantee System to reassure depositors their money is safe, even at times of stress. “Work on all the legs of the Banking Union are on track,” Dijsselbloem said.
European Central Bank executive board member Joerg Asmussen backed those comments, saying a “Banking Union is the biggest integration step in Europe” since the launch of the euro itself in 1999.
Among the larger member states, France has struggled for growth and going into the meeting Rehn had called on Paris to do more to get back on track, especially on its high labour costs.
French Finance Minister Pierre Moscovici insisted the government was pushing through “impressive reforms” and was at the forefront of the recovery with growth of 0.5 percent in the second quarter. For the bailed-out eurozone states — Greece, Ireland, Portugal, Cyprus — Disjsselbloem said they had to stick the course after the progress made so far.
On Cyprus, the eurozone ministers separately approved payment of its next ¤1.5bn aid tranche under a controversial bailout agreed in June which roped in large depositors to pay to wind up one of the island’s biggest banks.