Strauss-Kahn Says EU Must Convince Investors on Debt Crisis Before Summits
By Helene Fouquet, Mark Deen and David Tweed - Feb 20, 2011 1:00 AM GMT+0100 Sun Feb 20 00:00:01 GMT 2011
International Monetary Fund Managing Director
Dominique Strauss-Kahn said European Union leaders must convince investors that they can fix the region’s debt crisis and he’s
“confident” they will do so by the end of next month.
“
Markets aren’t everything, but markets are important,” Strauss-Kahn said in a Bloomberg Television interview with David Tweed in Paris. “You have to do something that will be seen, not only by markets, to work.”
After rescuing
Greece and Ireland, EU leaders are now seeking to overhaul the governance of the 17-nation euro area and create a permanent system to offer members financial support. While talks continue as governments prepare for two summits in Brussels next month, the EU’s decision-making process has sometimes slowed a resolution to the crisis that began more than a year ago.
If a solution “comes too late, you’re always behind the curve,” Strauss-Kahn said in an interview after meeting with Group of 20 officials in Paris. “Talking with the most important leaders in
Europe, I think they understand well the need to have a comprehensive approach” and “I’m rather confident they’ll come up with something rather comprehensive by the end of March.”
Political resistance to transferring funds between different countries could yet derail the plan.
Government bonds in Greece and Portugal dropped this week as Germany sought to tie EU efforts to overhaul the 440 billion-euro ($597 billion) European rescue fund for indebted states to measures aimed at increasing competitiveness.
German Elections
German Chancellor
Angela Merkel’s government may bear the greatest burden in a bailout mechanism.
She is negotiating a comprehensive EU plan to stem the debt contagion that has driven bond yields for some nations to euro-era highs as her party fights elections in seven of Germany’s 16 states. The ballots begin Feb. 20 in Hamburg, the richest state of all.
“Don’t expect me to say elections are a bad thing,” Strauss-Kahn said, when asked whether he was concerned that politics could prevent an agreement. “The more you have domestic political concern, the less you’re able to have a statesmen’s view.”
Euro-region finance ministers shifted the focus away from the near-term
crisis management with a decision last week that the permanent said mechanism to be set up in 2013 will be able to lend 500 billion euros ($675 billion), twice the amount of the fund set up in the wake of Greece’s near-default last year. As with the current mechanism, the IMF will contribute 50 cents for every euro from European governments.
Message for Portugal
Strauss-Kahn wasn’t alone today in stepping up pressure on EU governments. European Central Bank President
Jean-Claude Trichet told the region’s leaders that it’s up to them to retain the confidence of bond investors.
“
We call all governments in Europe without any exception” to “apply the plan they have as rigorously and as convincingly” as possible, Trichet said at a press conference in Paris after the G-20 meeting. “We have a very strong message for Portugal as well as for others. It’s up to countries to be convincing” and make their case to the markets.
Strauss-Kahn, who repeatedly shows up in polls as the most popular potential candidate for
France’s 2012 presidential election, also emphasized the need for euro-area governments to reduce their indebtedness in the years ahead. In his view, the easiest way to do that would be to increase the growth rates of their economies.
Need for Growth
“We just can’t continue to function with debt” equivalent to 100 percent of gross domestic product, Strauss-Kahn said at a press conference. “But the most important thing” isn’t budget cuts, “it’s growth. It’s finding the keys to growth again. Because without growth, you can do what you like on deficits and debt, but the European economy won’t recover.”
At his press conference, the 61 year-old also discussed the need to boost employment and reduce inequality in remarks which could be aimed at the French electorate. The former Socialist finance minister, who was nominated for the IMF post by Sarkozy in 2007, featured on the cover of two of the three national news magazines last week. His wife, Anne Sinclair, was quoted in Le Point weekly magazine saying she does not want him to stay in
Washington at the IMF.
Strauss-Kahn’s approval-rating lead over President
Nicolas Sarkozy is widening among French voters, according to an Ifop poll for Paris Match magazine published Feb. 16. Asked whether they “prefer” Strauss-Kahn or Sarkozy, 64 percent of those surveyed said they favored Strauss-Kahn while 33 percent opted for Sarkozy, Ifop said today. The 31-point gap compares with a lead of 29 points in July and 21 points last March, Ifop said.
In the Bloomberg Television interview, Strauss-Kahn brushed off questions about whether he intends to run.
“I have my kids here, the more I’m in France, the better it is,” he said. “I like restaurants here and I like to walk in the streets,” though “frankly, I have a job. I have no time to think of something else.”
(Bloomberg)
