Finland’s Olli Rehn is a three-time EU Commissioner, currently in charge of Economic and Financial Affairs; a pretty thankless watch considering the constant turmoil since he took office.
As the EU and eurozone enter uncharted territory with the Greek political crisis, a potential change of direction from France, and deepening cracks in Spain’s economy a perfect storm appears to be on the horizon. In an interview with euronews he plots a course for recovery.
Paul Hackett, euronews.
‘‘Commissioner Rehn, thanks for being with us. The economic road map proposed by you here in Brussels, proposed by Berlin, seems this month to have been rejected by French and Greek voters. Don’t you think it’s time to change the approach?’‘
Vice-President of the EU Commission, Olli Rehn.
‘‘I think it’s important that we in Europe now combine fiscal consolidation and sustainable growth.’‘
‘‘What do you actually mean by growth? Growth is like world peace, everybody wants it: but what exactly do you mean by growth?’‘
‘‘That’s precisely the problem in the current debate and therefore we have to substantiate and we have to tell the people how growth will come about. Our view is that we have to stay the course on fiscal consolidation because we can not grow by piling new debt on existing debt…”
euronews: ‘‘So its more of the same austerity, isn’t it?”
‘’…Can you, if you listen to me, I’ll tell you. So, first, we have to stay the course on fiscal consolidation and in parallel we have to reinforce the actions in the field of investment both concerning how to boost public and stimulate private investment.’‘
euronews: How do you do that?
‘‘Well, you do it first of all by creating confidence in the economy, which means you have to resolve the sovereign debt crisis and mitigate banking sector fragilities in order to have credit flowing in the economy, and in parallel you can use public banks and public investment such as the European Investment Bank. We need to stimulate private investment with that, because there is plenty of private money in Europe at the moment, but it is not going into investments.’‘
euronews: ‘‘But a lot of commentators are saying this is only going to tweak the current recipe.’‘
‘‘I don’t see how you can say that’s a small tweak. If you put 10 billion euros in the European Investment Bank you get 60 billion euros of lending by the EIB which can altogether imply, with leverage, around 180 billion euros of investment in infrastructure and innovation in energy and green growth in Europe. I don’t think that is insignificant. On the contrary.’‘
euronews: “What does Greece need to do to stay in the euro? “
‘‘We talk about Greece. For Greece it is important that the country will be able to, and the political leaders in the country, will be able to form a coalition government…”
euronews: ‘‘It doesn’t look like it’s going to……’‘
“…..and it’s able to bring the country out of its current difficult situation. And to support growth and employment enhancing policies over economic reforms and fiscal adjustment.’‘
euronews: ‘‘What if it can’t form a coalition government, what then?’‘
Olli Rehn: ‘‘Let’s not speculate on scenarios which are not yet happening. I trust that Greek political leaders will realise the seriousness of the situation and try to form a coalition government soon.’‘ euronews: ‘‘Would it be a disaster now if Greece did leave the euro?’‘
‘‘I do not want to speculate on the question of possible exit of Greece from the euro. I do not want to imagine the worst if it is not necessary. It’s more important now to be determined, especially in Greece, in order to form a coalition government and in a convincing manner tackle the economic challenges of the country.’‘
euronews: ‘‘The Commission President, Jose Manuel Barroso, has spoken about the fiscal compact being intelligent, being adaptable: does that mean less pain for Spain?’‘
‘‘Spain has formidable economic challenges, largely because of the accumulated external imbalances, because of the credit boom in the past decade, and the property bubble which has burst. And inevitably it will still take some time before this readjustment has been concluded.’‘
euronews: ‘‘Will it get the year that it needs to bring down deficits?’‘
‘‘I think that’s, with due respect, that is a too simplistic way of putting the challenges of Spain. Spain has major challenges in two fields, especially…well, three. The first one is, of course, the high level of unemployment, especially youth unemployment. The country is now tackling that with very substantial labour market reform, which is long overdue.
The second, the country, and the government as we speak is in fact meeting to decide on a very comprehensive root and branch reform of the savings bank sector, which is essential to restore confidence in the banking system of Spain, and make credit flow again.
And third, the excesses of regional governments needs to be controlled and curbed. So, Spain has to focus on these three things in order to restore confidence and improve the credibility of its economic and fiscal policy, which is essential for it to grow again.’‘
euronews: “My final point: will Greece be in the euro next year?”
‘‘Greece will be in the euro next year. Of course, it is essential that Greece will have to be able to take the necessary decisions to meet the conditions of the second programme of economic reform and fiscal adjustment, and that requires better political stability and a functional coalition government that enjoys the support of the majority in the Greek parliament.’‘