IOUS Eurozone members should not be allowed to block important bailout deals by themselves, a top European Commissioner claimed yesterday, looking to centralise more power in Brussels.
Countries like Germany have held fierce debates over how much cash they should lend to troubled governments in Cyprus and Greece, as they do not want their frugal taxpayers to bail out profligate peripheral states.
But they will not be able to stop the deal in future if commissioner Olli Rehn gets his way.
“If the International Monetary Fund takes decisions with 80 per cent majorities, why on earth should the Eurozone decide with unanimity?” Rehn asked MEPs, expressing frustration at the slow pace of the bailout process.
“When it becomes inevitable that a country is in need of financial assistance, it is essential that action is taken as soon as this is recognised. Delays are very costly to the economy and society.”
And he also blamed Cyprus’ own foot-dragging for the problems in the country, arguing the state held out for too long, allowing the problem to get progressively worse before a new government was elected and had to tackle the crisis.
Rehn was joined at the European Parliament by the European Central Bank’s Jorg Asmussen who warned Cyprus’ crisis is still far from over.
“The banking sector has not yet been stabilised – the burden sharing arrangement negatively affected depositor confidence and required the introduction of temporary and proportionate capital controls and restrictions on deposit withdrawals,” Asmussen said.
“Short term risks are high, as the deep recession is expected to take a toll on banks’ balance sheets.”
As a result he believes the banking union plans must be accelerated, “so as to rebuild confidence in the viability of the banking system.”