Euro is irreversible… EU response to crisis working: EFSF chief

Current account balances and competitiveness of the euro zones peripheral economies have been steadily improving, he said.

Despite the lack of confidence exhibited by markets and the scepticism of the broad public,members of the euro zone and the European Union have made significant progress towards sounder public finances,broader economic surveillance,more efficient financial market supervision and closing institutional gaps,European Financial Stability Facility (EFSF) CEO Klaus Regling said here on Tuesday.

Reforms implemented at national level in conjunction with the strengthening of economic governance and growth-enhancing measures taken at the EU level have started to deliver results, Regling said while delivering the inaugural International Institute for Strategic Studies (IISS) Oberoi Lecture.

Current account balances and competitiveness of the euro zones peripheral economies have been steadily improving, he said.

Rejecting the argument that Europe is on the decline,he said,This is not true. There is no decline in Europe. The euro is irreversible. He argued that there were the first signs in financial markets that the EU response to the euro crisis was working but that there was a need for more fiscal,economic and political union.

Plans have already been laid for the establishment of a banking union and a fiscal union,underpinned by an integrated economic policy framework, Regling said in his lecture,which was attended by a galaxy of financial sector bigwigs including Reserve Bank of India Governor D Subbarao and Sebi chairman UK Sinha.

EFSF was created by the euro area member states in 2010 with the mandate to safeguard financial stability by providing assistance to member states. Europe has mobilised $1.5 trillion to tackle the crisis.

However,he said five years after the beginning of the global financial crisis,all major economic regions are exhibiting new signs of weakness and the outlook is highly uncertain. Debt overhang in many parts of the advanced world has been taking toll,making growth prospects cloudy,with a negative impact on emerging economies. Europe and the euro zone are seen by many as the epicentre of the global problem,the main source of contagion and negative spill-overs, he said.

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We live in a globalised world where interconnectedness and interdependence are an ever-increasing trend. As we are entering a difficult patch in the world economy,the simultaneous slowdown in many developed and emerging economies… it is all the more important to be well informed about developments in different parts of the world, Regling said.

On the situation in Europe,the euro and the future of European integration,he said,Many believe that Europe is in a big mess,the sovereign debt crisis has lasted three years and there seems to be no end in sight. Hence,is the creation of Economic Monetary Union (EMU) a failure? No it is not.

The euro is the outcome of a long history of monetary and economic cooperation. It has survived many crises. The launch of EMU in 1999 was possible only because of this history of increasing integration and convergence. It would be a mistake to see the euro exclusively as a project of economics. It is one of the pillars of todays EU, he said.