Europe has left crisis firmly behind it – Minister Edward Scicluna
Minister for Finance, Prof. Edward Scicluna stated that in spite of the media’s attempt at portraying the Euro as if it were in perpetual crisis, the Euro’s real crisis is firmly behind it.
Speaking at the European Parliament during an inter-parliamentary conference on Stability,
Economic Coordination and Governance in the European Union, Minister Scicluna noted that the Eurozone is growing by 1.8 per cent and has an acceptable level of inflation of also 1.8 per cent.
He referred to the causes of the real crises which had affected, in an adverse manner, the Euro. The first of such instances was the global financial crisis triggered by the US mortgage markets, which reached its apex with the collapse of Lehman Brothers in 2008 that caused European banks, and hence European economies to suffer.
The second instance was the Euro debt crisis. The latter crisis caused markets to lose trust in Greece and Ireland to such an extent that re-financing risk premia became prohibitively expensive, something which had been deemed unthinkable when the EMU was set up.
He recalled how, in the absence of a bail out system, there was no mechanism in place
at the time, there was a real chance of a breakup of the euro, which was averted thanks to Europe’s decision makers.
Minister Scicluna attributed the Euro’s survival to the commitment of national governments which have put their fiscal house in order, adjusted macroeconomic policies and improved
competitiveness, resulting in ever diminishing fiscal and current account imbalances. However, he said that the disciplining of countries which break the rules “remains a chimera”.
The minister noted the impressive progress in the field of prudential supervision, following the introduction of the Single Supervisory Mechanism and the Single Resolution Board. He described the transfer of such important competencies to the supranational level as “a form of European integration that would have been unthinkable only a few years ago.”
Speaking about the European Stability Mechanism, Minister Scicluna described it as a
lender of last resort to sovereigns, a function which did not exist prior to the crisis. He described how through its previous five programmes, it disbursed €265 billion, which equates to three times as much as the IMF has lent out globally over that period, and in so doing, protected countries from losing market access. In fact, it provides low interest rates and long maturities in order to help borrowing countries to re-join debt sustainability.
Minister Scicluna also noted how ESM programmes carry with them conditions, such as
restructuring and reforms for the indebted countries, which prove to be painful, yet necessary for such countries to return to the debt market.
The ESM, said Minister Scicluna, contributes towards financial solidarity between Euro area
countries, through its loans’ favourable financing conditions which amount to about €8 billion a year in the case of Greece.
In conclusion, Prof Scicluna stated that critics of the EU are making their voices heard very clearly these days, stating that “we should not shy away from defending its institutions.”