European Union Economic and Monetary Affairs Commissioner Olli Rehn said on Tuesday there were signs the eurozone would recover from a mild recession in the coming months and he voiced confidence a debt restructuring deal for Greece would be successful.
Rehn also urged Spain’s new government to quickly present its budgetary plan for this year to the Commission and to press ahead with structural reforms to regional finances.
“While the euro area is currently in a mild recession there are at the same time signs of stabilization,» Rehn told a conference in Paris.
“I am convinced that, as a result of our collective efforts, and if we keep up our recent decisive action, we can witness a turning of the tide in the coming months in the European economy,» he added.
He cited signs of an improvement in the solidity of the banking sector thanks to the European Central Bank’s provision of 1 trillion euros of three-year liquidity.
“The European banking sector is in recovery and the risk of an outright credit crunch in the real economy in Europe has been prevented largely thanks to the recent actions by the European Central Bank through its long-term refinancing operations,» he said.
Asked about concerns that Greece call fall short of its target of 75 percent participation in a private creditor restructuring which should wipe 100 billion euros off the value of its debts, Rehn said: «I am confident that the PSI deal will be successfully concluded.”
“It is one of the cornerstones of the new program for Greece which aims at reforming the country and boosting growth and employment in Greece,» Rehn said, adding it was too soon to consider whether a third rescue would be needed for Greece as terms of the second program were still being finalized.
Greek Finance Minister Evangelos Venizelos told Reuters on Monday that he was optimistic that the deal would secure investor participation of at least 90 percent.
On Spain, Rehn said Prime Minister Mariano Rajoy’s government needed to define a medium-term budget strategy and present its 2012 budget to the Commission as soon as possible.
“We need full information from the Spanish government of the fiscal plans for this year and next and only once we have this full information can we make an assessment of whether effective action is being taken by Spain,» he told journalists on the sidelines of the conference.
Spain defied Brussels last week and set itself a softer deficit target of 5.8 percent of GDP this year, from 4.4 percent previously, but meeting even the revised objective could prove tough if regional leaders resist budget cuts.
“It is important that Spain will address the structural weaknesses of regional finances this year through the regional stability law. Slippages in regional governments have been one of the Achilles’ heel of Spanish fiscal policy,» he said.