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Eurogroup Insists Eurozone Strategy Is 'Appropriate'

by Ulrika Lomas,, Brussels

19 September 2012

Luxembourg’s Prime Minister and Eurogroup President Jean-Claude Juncker has recently presided over the latest informal Eurogroup and Economic and Financial Affairs Council (Ecofin) meeting in Nicosia, with the talks focussing on the economic and financial situation in the eurozone.

Commenting on the discussions, Juncker said that economic adjustment is currently taking hold across the eurozone, despite the difficult circumstances, emphasizing that this is a good sign for future growth.

According to Juncker, the Eurogroup deemed during the course of the meeting that its political response to the crisis is appropriate and welcomed the European Central Bank’s (ECB) decision to engage in outright monetary transactions (OMTs), to address severe distortions in government bond markets. The ECB’s new bond-buying plan is intended to cut borrowing costs of debt-ridden eurozone states by buying their bonds.

As regards the financial situation in Spain, Spain’s Economy Minister Luis de Guindos reassured the Eurogroup by emphasizing that the Spanish authorities remain committed to achieving their budgetary targets, if necessary by introducing additional fiscal measures.

The Spanish minister revealed that a national programme of structural reforms is due to be presented at the end of the month. The minister explained that the assistance plan for the Spanish banking sector is currently being implemented, and that the process of recapitalizing and restructuring the sector is continuing as planned and is due to be completed in November 2012.

Following its examination of the situation in Greece, the Eurogroup called for the Greek authorities and the troika (comprising the European Commission, the ECB and the International Monetary Fund) to continue negotiations and to unite on credible measures designed to reduce Greece’s budget deficit for the 2013-2014 period.

Underlining the need for these measures to focus on spending reductions, and to be both solid and effective, Juncker pointed out that the situation in Greece is due to be discussed again during the upcoming Eurogroup summit in Luxembourg on October 8, while noting that any political decisions would probably not be taken until the second half of October.

During its meeting, the Eurogroup also discussed implementation of the fiscal adjustment programmes for Ireland and for Portugal, as well as the economic and financial situation in Cyprus, including Cyprus’s demand in July of this year for a financial assistance programme.

During the informal Ecofin meeting, the finance ministers of the 17 eurozone member states and the governors of the central banks of the 27 European Union (EU) member states discussed the budgetary implications of the implementation of a banking union and recent developments in the financial markets. The finance ministers also examined the European Commission’s September 12 proposal on the implementation of a unique mechanism of banking supervision.

TAGS: tax | economics | European Commission | Ireland | Portugal | fiscal policy | banking | budget | Luxembourg | Cyprus | Germany | Greece | Spain | currency | Europe

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