This interview with Klaus Regling, the head of the European Financial Stability Facility (EFSF), took place on December 17, 2011, and was broadcast on Al Jazeera. The interviewer was Sami Zeidan. A revised and updated version of the interview follows, along with a postscript on the recent downgrading by Standard & Poor’s of credit ratings in the eurozone.
Sami Zeidan: On December 8 and 9, at the European Union summit in Brussels, European leaders tried to solve the debt crisis, and to agree on a long-term solution. The summit discussed a fiscal pact, as they call it, that if eventually enacted would actually make it illegal for a member country to run up budget deficits larger than 3 percent of GDP. Break that law, and the member country will end up in Brussels at the European Court of Justice, where it will face legal proceedings and ultimately sanctions.
But before things reach that point, the current crisis needs to be resolved, and that brings us to the European Financial Stability Facility, based in Luxembourg and set up by the members of the European Union in 2010 to act in an emergency. If a member state can’t pay its bills, this bailout fund may step in. How many people do you have working here?
Klaus Regling: We have been growing rapidly the last twelve months and we now have twenty-five staff, but let me clarify with regard to the EFSF’s mission. Our mandate is to safeguard financial stability in the euro area. The EFSF provides financial assistance to euro-area member states in financial need. Its shareholders are the seventeen euro-area member states. To avoid any confusion: the EFSF has no direct link with the European Central Bank (ECB), which is the independent central bank of the European Monetary Union. The mandate of the ECB is to deliver price stability. This mission is clear and remains unchanged despite the crisis and is anchored in the Maastricht Treaty. The ECB has an undisputed track record. Since the start of the Monetary Union twelve years ago the average inflation of the member states has been close to 2 percent. The ECB is currently buying bonds of certain euro-area member states on the secondary market but this Securities Markets Program is only about ensuring that monetary policies of the member states get the support they need.
The ECB also provides ample liquidity to banks to safeguard financial stability in the eurozone. Recently the ECB provided nearly €500 billion in loans to banks with a maturity of three years. The EFSF provides loans and other financial assistance only to member states of the euro area.
SZ: It’s here, to this office in Luxembourg, that so much hope is now directed. The question is, does Mr. Regling have the money and the credibility it …
This article is available to subscribers only.
Please choose from one of the options below to access this article:
Purchase a print subscription (20 issues per year) and also receive online access to all articles published within the last five years.
Purchase an Online Edition subscription and receive full access to all articles published by the Review since 1963.
Purchase a trial Online Edition subscription and receive unlimited access for one week to all the content on nybooks.com.