THE EUROZONE crisis could return with a vengeance if governments keep stalling and putting off vital economic reforms, European Central Bank (ECB) official Jorg Asmussen warned yesterday.
Peripheral governments had seen borrowing costs fall as they started on the reforms to make their economies more competitive. But the European Commission then took this leeway from markets as a sign they could give the countries longer to get their finances in shape and their reforms on track.
“The slowdown of the reform in the Eurozone is a risk. Especially in times of low growth, calls for a little more time and less pressure for reform are loud,” he told a conference in Magdeburg.
“But without further structural reforms and rapid progress in fiscal consolidation this can easily lead to renewed tensions in sovereign bonds markets. Taking a break or a rest is not a real option.”
Asmussen also stressed the need for the ECB to take over the regulation of the currency area’s biggest lenders, and said he wants to make sure broken banks can fail safely.
“Failing banks will have to be concluded and executed to prevent a zombification of the sector,” he said.