Euro to stay despite crisis, says EU

saying the currency bloc’s 17 members had taken “giant steps” toward restoring confidence.
“Let there be no mistake: this is not a crisis of the euro as a currency,” he told delegates to the Asian Financial Forum, a gathering of regional banking and finance chiefs in Hong Kong.
“The euro is here to stay. In the last 10 years the euro has proven itself as a true world currency . . . And despite the difficulties, it remains strong.
“The real crisis the eurozone faces right now is a crisis of confidence. Our political unity and our determination and our ability to rectify what is wrong . . . are being tested.” Standard & Poor’s downgraded nine eurozone states Friday, including France and Austria, on concerns about high government debt levels and funding costs.
The US-based agency said European policymakers’ response to the crisis, including the outcome of a summit last month, “may be insufficient to fully address ongoing systemic stresses in the eurozone”.
But Barnier said ratings agencies needed to “take better account of the unprecedented efforts being made by governments” to overcome the crisis.
He said he was “surprised time and time again by the timing agencies choose to make such announcements”, and called for greater transparency in how they reached their decisions.
“I would like to have these ratings agencies signal that there was a problem five or six years ago, not now,” he told reporters on the sidelines of the forum.
“I want to make sure that when they make these announcements they are fully taking into account the efforts being made by the governments.”
Even so, he said he did not want to downplay the seriousness of the threat to European economic stability.
“We need to avoid another large credit crunch and disastrous consequences for the real economy,” he said, adding that the sovereign debt crisis was “spilling over” into the interbank lending market.
The European Commission forecasts 0,5 percent growth in the euro area this year.
European Economic and Monetary Affairs Commissioner Olli Rehn has criticised S&P’s downgrade as “inconsistent”, while German Foreign Minister Guido Westerwelle called for the creation of “independent” European ratings agencies.
Belgian Prime Minister Elio Di Rupo said yesterday the ratings agencies are leading Europe into a “downward spiral”, with the downgrades expected to increase the affected countries’ borrowing costs.
British Finance Minister George Osborne, who is also visiting Hong Kong and spoke ahead of Barnier at the forum, said the downgrade should spur reform.
“No one likes to see credit ratings downgraded, but what matters much more are the actions Western countries take to restore their own fiscal sustainability and take the structural reforms necessary to ensure productive, competitive economies,” he said.
European governments reinforced the eurozone’s Stability and Growth Pact last month with more automatic sanctions to punish states that violate deficit and debt limits. EU leaders decided to tighten the rules even more, with 26 of 27 EU governments negotiating a new fiscal treaty that would require governments to enshrine balanced budgets in their constitutions. – AFP.