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Eurozone Poised To Take Imminent Fiscal Action

by Ulrika Lomas,, Brussels

01 August 2012

Insisting that a ‘crucial point’ has been reached in the euro crisis, Luxembourg’s Prime Minister and Eurogroup President Jean-Claude Juncker recently underlined the need for eurozone heads of state and government to take further decisions in the coming days to stem the debt crisis.

Underscoring that “there is no time to lose”, Juncker warned that the months ahead will indeed be “tense”. The eurozone is at the point where it has to prove by “all available means” its determination to guarantee stability, given that the world is currently talking about whether or not the single currency will exist in a few months, Juncker said.

Stating that he has no doubt that the decisions taken at the European summit at the end of June will be applied, Juncker revealed that it is just a question of exactly what measures to take and when. A decision will be taken in the coming days following examination of the markets, the Luxembourg minister added.

In the next few days, eurozone member states will act together with the temporary bailout fund, the European Financial Stability Facility (EFSF), and the European Central Bank (ECB), without infringing the ECB’s independence, Juncker continued.

Alluding to the issue of Greece, Juncker stressed that anyone who thinks that Greece’s exit will solve the problem is mistaken and fails to understand the root causes of the crisis. While conceding that Greece obviously has to improve its credit rating, Juncker pointed to the “enormity of the cost” of excluding Greece for the rest of the Eurogroup, whether in terms of a shockwave or the discredit that follows.

The Eurogroup President’s comments follow hot on the heels of similar remarks expressed earlier by ECB President Mario Draghi, who pledged that he would do whatever was necessary to protect the eurozone from collapse. Draghi’s statement came after a sharp rise in Spain’s borrowing costs to untenable levels exacerbated the crisis.

German Chancellor Angela Merkel and French President François Hollande also issued a joint statement recently emphasizing that they are “fundamentally attached to the integrity of the eurozone” and determined “to do everything to protect it”.

Member states and European institutions have to fulfil their obligations, they added, reaffirming the need to rapidly implement the conclusions of the European Council meeting on June 28 and 29.

At the end of June, eurozone heads of state and government united on far-reaching measures to stem the debt crisis, including plans to ease conditions for financial assistance and to open the door for direct bank payments from the permanent euro rescue mechanism, the European Stability Mechanism (ESM).

TAGS: tax | economics | fiscal policy | Luxembourg | Greece | Spain | currency | European Union (EU) | Europe

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