The head of the European financial bailout fund, Klaus Regling, has claimed that the Eurozone crisis will be over in ‘two years’ if the member states stick to their austerity promises.
Regling, a German, told the German newspaper Der Spiegel that his European Financial stability facility (EFSF) rescue fund has been successful at limiting the damage and even claimed that it was the EFSF that has reduced the chances of worst case scenarios from becoming reality.
Perhaps he should say that to the peoples of Greece, Spain and Portugal.
“If all countries in the currency zone strictly fulfil their budgetary consolidation targets and continue to improve their competitiveness then the crisis can be over in one or two years, if it weren’t for us, Portugal and Ireland would probably no longer be in the Eurozone.”
The EFSF was established with a lending capacity of €440billion but is set to be replaced by the new permanent bailout fund called the European stability mechanism with firepower of up to €500billion. The ESM was due to come into force on July 1, but it has suffered delays, notably due to legal challenges in Germany, the fund’s effective paymaster.
Regling has been tipped to lead the ESM when it starts operations, AFP reported. He said that a ruling by Germany’s highest court on September 12 on the challenges to the ESM would determine its fate.
“Without Germany, the ESM makes no sense.”
The ESM was due to come into effect on the 1st of July but legal disputes in Germany and disagreements between EU members have pushed its initiation back to later this month. The fact that it has taken this long just to get a plan on the table, let alone the end of the crisis, shows that Regling is either an extreme optimist or not in touch with reality.
Currently the Euro is trading relatively steady as the markets await the outcome of the European Central banks meeting on Thursday. Traders are remaining cautious as they take a wait-and -see approach to the single currency. Any positive action decided by the ECB on Thursday is sure to see the Euro make gains against most of its peers whereas if the markets believe that the ECB is hesitating over taking action to curb the Euro crisis we are sure to see the currency make negative movements.
Italy and Spain are not showing much appetite to request aid from the ECB for a bailout fund despite the two nations borrowing costs remaining high, and as more and more regions in the country’s request financial assistance from their governments. According to Italian PM Mario Monti his country will not need to use any European rescue funds for the moment as his government’s austerity measures are starting to create positive results. Spain however is not performing as well, unemployment continues to rise and the situation resembles that of Greece as it slid into economic disaster.
“The market is expecting a lot from the ECB,” Gustavo Reis, an economist at Bank of America Merrill Lynch, wrote in a note to clients.“However, we look for little clarification on the bond-buying program. The likely market disappointment should intensify the pressure on Spain.”
The Pound to Euro exchange rate is currently trading at 1.263
The Pound to US Dollar exchange rate is currently trading at 1.588
The Pound to Australian Dollar exchange rate is currently trading at 1.549
The Euro to US Dollar exchange rate is currently trading at 1.256
The Euro to Pound exchange rate is currently trading at 0.791
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