Eurozone is in a "very grave state of affairs"

Published on Tuesday, 17 January 2012 11:19
Posted by Scott Buckler

The Eurozone is in a "very grave state of affairs", Mario Draghi told Economic and Monetary Affairs Committee MEPs on Monday, in his first visit as head of the European Systemic Risk Board

Mr Draghi highlighted the need not just for commitments, but also for prompt and coordinated action by Member States, to resolve the Eurozone crisis. He also set out his options for the EU's bailout fund, which had been downgraded during the meeting.

Although speaking as head of the ESRB, Mr Draghi also kept his other hat, as European Central Bank (ECB) President, firmly on his head, in contrast to his predecessor Jean-Claude Trichet.

The key to solving the crisis - take actions in the right order

Mr Draghi called the planned new treaty on reinforced economic union "important", but spent much of the meeting stressing that it needed to be supplemented  by action, coordination and correct sequencing of the steps to be taken. "If all players act together we will have stability" he said.Some MEPs stressed the need for real investments and growth, as well as the new treaty, to stabilise the Eurozone. Others criticized the banks for not transferring the money they were borrowing cheaply to the real economy.  The ECB was urged to act too, by forgoing a portion of the Greek debt it owned.

Time to marginalise the credit rating agencies

Jean-Paul Gauzes (EPP, FR) asked Mr Draghi about the best design for legislation to regulate credit rating agencies, whereas Leonardo Domenici (S&D;, IT), asked for his reactions to the recent downgrading of the European Financial and Stability Fund (EFSF). Credit rating agencies have undergone a "terrible loss of reputation", Mr Draghi replied, but "rather than criticising them we should make sure the legislation leads to less reliance on them and more competition" .  On the EFSF downgrade, Mr Draghi hinted that one solution could be for AAA rated countries to contribute more to the fund.

Treaty on reinforced economic union

Later in the evening a joint meeting of the economic and monetary affairs and constitutional affairs committees was held with Roberto Gualtieri (S&D;, IT), one of the MEPs sitting on the working group drafting up the treaty on a reinforced economic union.  Mr Gualtieri gave an update on the open points and said he was hopeful that changes would be made to the text in order to address some of Parliament's concerns.  Members called on the "working group MEPs" to continue pressing Parliament's key concerns, to ensure that the final text is not too one-sided in its focus on austerity, and does not lead to excessive deviation from the normal EU procedures.

Several MEPs also called for a pragmatic approach, to reach a deal that could kick into  action quickly, rather than drawing out the talks.


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