ESM: 2014-27. Comienza el VERDADERO programa de asistencia financiera a España.

[stone]

 

[Janus]

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Únete al mayor foro de economía de España

 

[stone]

I am convinced that focussing only on the ECB neglects important changes in four other areas that contribute to the euro area’s recovery.

As the ESM is the fifth largest issuer in new issuances in euro after Germany, France, Italy and Spain I spend a lot of time talking to investors.

They would not trust in the sustainability of euro area reforms if they believed it was all based on monetary policy alone. ::

The first of the four elements are reforms at the national level. Particularly in the five programme countries -Ireland, Portugal, Greece, Spain and Cyprus there are impressive efforts to consolidate and reform structurally.

... our loans always come with conditionality and only if the countries fulfill these conditions, the loan tranches are disbursed. The results are there: unit labour costs and current account deficits have decreased

The third element is the creation of the crisis resolution mechanisms, first the temporary EFSF in 2010, then the permanent ESM in 2012. Together they have a lending capacity of €700 billion and we have disbursed €232 billion to the five programme countries.

Also, I would like to add that the presence of the ESM makes life easier for the ECB. It can now concentrate on being the lender of last resort for banks. The expectation to be the lender of last resort for governments has been taken off the ECB’s shoulders.

Extensive bail-in rules will have the effect that the link between banks and sovereigns will be significantly weakened. If despite the bail-in and national government intervention European public money is needed, the ESM may recapitalize a bank directly, as a last line of defence

With our loans and our lending terms we have created a new framework for Greece that makes the traditional debt sustainability analysis meaningless. We provide loans to Greece at ultra-low interest rates because we pass on our funding cost of just above 1.5% plus a very small margin to cover our operational cost. On top, Greece is currently benefitting from a 10 year interest rate jovenlandesatorium. Also, the loan maturities are over 30 years. With these parameters in place, Greece has no debt overhang for at least decade. These conditions provide the space for Greece to get into shape, start growing again and to honour its obligation once time comes

From my perspective it would be important to focus on a few items. I would support the creation of a European finance minister or commissioner that has the right to veto national budgets if they breach the agreed budget rules and if this budget creates negative spill-overs for the euro area. Also, I think contractual arrangements that are fed with a limited fiscal capacity in order to encourage structural reforms are a good proposal.

It seems clear that such innovations would require a limited EU treaty change. And I would hope that such an occasion would be used to integrate the ESM into the EU treaty.

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