FRANKFURT (MNI) – Making the results of bank stress tests public
will assist in the restoration of confidence in financial markets,
European Commissioner for Economic and Monetary Policy Olli Rehn said
Tuesday.
Spanish and Portuguese fiscal goals are properly ambitious, Rehn
said in remarks at the Summer Reception of the Association of German
Banks in Brussels, according to a text provided in advance.
He insisted that an economic recovery is underway in Europe and,
although not even across member countries, will strengthen next year.
“It is important that the European Council last week agreed to
disclose the results of the ongoing bank stress tests in the course of
July,” he said. “This should help in restoring confidence in the
European economy.”
The latest hikes by Spain and Portugal of their consolidation
targets are “appropriately ambitious and imply substantial fiscal
consolidation,” he said.
The bilateral loans to Greece decided in May and the Financial
Stability Mechanism agreed on earlier this month, both naturally
“coupled with strict conditionality,” should also “alleviate the
concerns of the financial market, and improve investor and consumer
confidence,” Rehn affirmed.
Still, financial markets are concerned about some sovereign debt in
Europe, where the total budget deficit will hit 7.25% this year before
subsiding somewhat to 6.5% next, he said.
“Despite all the recent market turbulence, it is a fact that a
gradual economic recovery is underway in the EU,” he asserted,
reiterating that the growth path is “still likely to be bumpy, with an
uneven pace of growth expected across member states.”
Rehn repeated Commission forecasts calling for the EU economy to
expand by about 1% in 2010 and 1.75% in 2011, “when the economic
recovery is expected to have gained a stronger momentum.”
Presently, there is a mixed picture, he said, as hard data
“indicate more resilience” while sentiment, especially among consumers,
has weakened.
The fiscal exit strategy the EU defined last year “is even more
valid today” as a way of addressing fears that consolidation will
throttle growth, Rehn said.
“Consolidation should be pursued in a coordinated and
differentiated way,” he argued. “Countries with no or little fiscal
space should accelerate fiscal consolidation immediately. Those with
better fiscal space should start consolidation from next year onwards.”
Overall, Europe’s fiscal stance should be restrictive starting in
2011, he said.
— Frankfurt bureau tel.: +49 69 720142. Email: dbarwick@marketnews.com
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