Guy Verhofstadt Calls Greek Crisis Trigger and Not Cause of EU Financial Crisis

by on July 26th, 2010
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Guy Verhofstadt, leader of the Alliance of Liberals and Democrats in the European Union Parliament, and former Belgian Prime Minister and possible candidate for the 2014 EU Commission presidency, proposes federal union as the means to break the deadlock and solve Europe’s financial crisis.

Speaking to the Hong Kong Chamber of Commerce yesterday, Verhofstadt outlined comprehensive and detailed proposals for solving the EU’s financial crisis. Verhofstadt states that with the launch of the Euro there was no public authority strong enough to penalize members who breached the rules. He calls the Greek crisis the trigger and not the cause of the crisis. The EU has used an intergovernmental method to solve its problems and he states “markets are asking for more unity and a transfer of powers to the European Institutions.”

The decisions the EU has made to help the EU out of the crisis thus far include the implementation of the European Financial Stability Facility or rescue fund. The establishment of the European System of Financial Supervision along with the approved six pack, an amended series of EU laws, which impose tougher budgetary discipline to strengthen economic governance within the Eurozone. In addition the 50 percent haircut to Greek debt, and the 1000 billion euro increase to the rescue fund and the recapitalization plan for banks. Verhofstadt states that these measure move the crisis forward step by step but he sees no breakthroughs, big bangs or full range bazookas to overcome the crisis in a lasting way.

Guy Verhofstadt calls for a federal union, a real economic and political union and temporary urgency measures until the Union becomes a reality. He proposes a European government that is responsible for the economic and fiscal policy of the whole Eurozone. This includes a European Minister of Finance and a European Monetary Fund. Verhofstadt also proposes that the European Commission become a real European executive, “that sits in the middle of the European decision making process.” Currently the increase of powers is going to the Heads of the States of Government. “We also need, just like the United States of America…a single bond market, a Eurobond market,” which Verhofstadt states will close the gap for the unbearable spreads between Europe’s national bond markets.

Guy Verhofstadt stated that a European bond market is desperately needed to finance public debt at the lowest cost, to recapitalize European banks and to finance their investments for future growth. He pointed out that although European debts and deficits are lower than the US, the US is in a better position to survive because it is a federal state.

In summary Verhofstadt proposes a federal economic and fiscal Union, a European Minister of Finance, and a Euro bond market to break the deadlock.

For full text of Guy Verhofstadt’s speech:

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