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Eurozone remains attractive according to ECB vice-president

After almost a decade of crisis and uncertainty in the Eurozone, optimism is on the rise.

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Eurozone remains attractive according to ECB vice-president

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After almost a decade of crisis and uncertainty in the Eurozone, optimism is on the rise. Unemployment remains high, however, as do divergences between member states. What needs to be done for the euro to deliver on its promise to increase wealth? To discuss this, Euronews speaks to the vice-president of the European Central Bank, Vitor Constancio.

Point of view

We need new initiatives at the European level to deepen the functioning of the monetary union.

Vitor Constancio Vice- President, ECB

Efi Koutsokosta, Euronews: “Mr Constancio, welcome to The Global Conversation. So, do you share this optimism? Is it justified or are there risks that can really revive the crisis once again?”

Vitor Constancio, Vice- President of the European Central Bank: “It’s important to underline that growth has converged, meaning that the rates of growth of all the countries are now very close together, and that’s the best situation from that point of view since the beginning of the monetary union.”

Efi Koutsokosta, Euronews: “But is the Eurozone still attractive to member states? I am saying that because, in the wake of the crisis, there are a lot of people saying that this currency is not designed for all, but only for a few strong member states.”

Vitor Constancio, Vice- President of the ECB: “We were initially eleven countries, then twelve in 2001, and then in 2007, 2011, 2014, 2015 other countries joined, which shows that during the crisis there were several countries still very much attracted to the idea of the stability and the openness that the monetary union offers to all countries.”

Efi Koutsokosta, Euronews: “But we see member states like Hungary and Poland that are not willing to join…”

Vitor Constancio, Vice- President of the ECB: “I won’t discuss the position of any particular country or government, it’s their view. But there is a presumption in the treaty, and that’s what Mr Juncker highlighted in his (State of the Union) speech, that all member countries are supposed to join eventually, except two countries that are still members and have an opting-out clause: the UK, which is now leaving the EU altogether, and Denmark. All the others, according to the treaty, are presumed to join one day.”

Efi Koutsokosta, Euronews: “There are also other proposals on the table concerning, for a example, a finance minister of the EU or the Eurozone, or a Eurozone budget. Why is a minister needed in the EU right now?”

Vitor Constancio, Vice- President of the ECB: “The idea of a finance minister is more recent and is presumably connected with the introduction of such functions at the central level of the euro area, in order to have someone in charge and responsible for managing that additional capacity and that stabilization function in the monetary union.”

Efi Koutsokosta, Euronews: “Does this mean that the member states should give some powers to this minister?”

Vitor Constancio, Vice- President of the ECB: “Yes, of course. But the stability and growth pact already implies, with all its reforms over the years, a lot of coordination and rules that have to be complied with by the countries. What would presumably be at stake now is the creation of some more instruments to help stabilise potential recessionary periods in the euro area in the future.”

Efi Koutsokosta, Euronews: “But let’s talk about EU growth. Things are improving, maybe the economy is doing better, maybe wages are going up, maybe unemployment is falling, but not everywhere. There are, for example, the countries of the South that are still struggling to survive, to create growth: Italy, Portugal, Greece. And we see other countries, the strongest ones, which are in better shape. How can you tackle this?”

Vitor Constancio, Vice- President of the ECB: “Well, in the first place, all these countries that you mention, and also Spain, are growing. And in the case of Spain and Portugal, they are growing above the average of the euro area right now.”

Efi Koutsokosta, Euronews: “But people don’t feel that…”

Vitor Constancio, Vice- President of the ECB: “Not yet. But in the first place it’s being felt in the reduction of unemployment in those countries. So growth has returned to all countries. And so, the degree of divergence has stopped, which had been ongoing since the crisis. And, of course, we need to strengthen these movements, and that’s why we need new initiatives at the European level to deepen the functioning of the monetary union.”

Efi Koutsokosta, Euronews: “What about Italy? Is Italy the sick child of the euro area? Because, of course, Italy is a very particular case, with a huge exposure to Nonperforming Loans and a vulnerable banking system.”

Vitor Constancio, Vice- President of the ECB: “The main consequence of having too high Nonperforming Loans is on profits because all those loans are not providing the revenue, so the NPL question is indeed very important to restore conditions of improved profitability of banks so that they can then offer new credits to support the recovery.”

Efi Koutsokosta, Euronews: “But despite the recovery of the eurozone, all these positive messages, we have many challenges ahead. One of these is Brexit of course. What could be the biggest risk of this negotiation, of this divorce?”

Vitor Constancio, Vice- President of the ECB: “In economic terms, one has to only consider the size of the UK economy and the size of the rest of the EU to see that the consequences and the disruption would be much more significant for the smaller part in that negotiation than the EU as a whole. I don’t expect, and no one is expecting, that Brexit will mean that there would be no trade between the two parts. That won’t happen. So there will not be a total disappearance of trade. Not at all.”

Efi Koutsokosta, Euronews: “Mr Constancio, you have been in this position since 2010. So you have experienced the hardest times of the Eurozone. What was your most difficult moment over these years?”

Vitor Constancio, Vice- President of the ECB: “Well, it was the start of the phase of the crisis when Greece came to a situation where the revelation about the budget deficit created a situation of no access to the financial markets. That was in 2010.”

Efi Koutsokosta, Euronews: “And you say that the end was close?”

Vitor Constancio, Vice- President of the ECB: “Well, I wouldn’t say that, especially with hindsight, but during those moments, it was indeed the first big shock of the crisis. Then, of course, we had many other vicissitudes later on, some related to Greece, some related to other countries. 2015 was also a difficult moment, of course, but the beginning, and the big shock, and the surprise of what it could imply was indeed the most difficult moment.”

Efi Koutsokosta, Euronews: “Mr Constancio, many thanks for being with us.”

Vitor Constancio, Vice- President of the ECB: “Thank you.”