Tags: EC | Barroso | Urges | Europe | Embrace | Reforms

EC's Barroso Urges Europe to Embrace Reforms After Crisis

Friday, 01 Oct 2010 01:45 PM

European Commission President Jose Manuel Barroso said the European Union must focus on reforms and exit a crisis mind-set to strengthen a fragile economic recovery.

"A degree of cautious optimism has taken root," Barroso said in recent remarks to the Council on Foreign Relations.

Barroso attempted to put a line under Europe's debt crisis which shook global markets earlier this year and called into question the viability of the euro currency.

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Asked by former World Bank President James Wolfensohn if Europe has moved beyond all its problems, Barroso replied: "I thought the assessment of Europe was exaggerated."

"I think the euro is a strong currency, and here to stay," he said at the event taking place on the sidelines of the United Nations General Assembly meeting.

Europe responded to the crisis by increasing government spending and loosening monetary policy, thereby pumping cash into the economies and providing a counterweight to declining economic activity, he said.

But now structural reforms must be implemented in order to avoid disappointing medium-term growth prospects.

"The priorities on the to-do list of EU economic policy making are: completing financial regulatory reform, continued fiscal consolidation, and tackling macro-economic imbalances by frontloading structural reforms," he said.

European governments that were viewed as being fiscally weak have adopted austerity measures, while the United States has implemented looser monetary policy and fiscal stimulus measures.

Asked if this would put Europe and the United States at cross-purposes, Barroso said, "It is fundamental to restore confidence in the markets. I repeat it would be complete madness for Europe to go for expansionary policies."

He reminded the audience the United States is one country with one budget and monetary policy while Europe, with its many states, may have one monetary policy but many budgets.

Even after some European banks failed tests of their durability in a theoretical crisis earlier this summer, Barroso assured the European banking system was healthy.

To believe otherwise "is completely wrong," he said.

A POWERFUL PARTNERSHIP

Barroso fleshed out his vision of a reinvigorated European economy as he tried to counter the bitter impressions left by the Greek debt crisis as well as uncertainties over the health of other economies such as Portugal, Ireland, Italy and Spain.

He summed up the vision as "stabilize, consolidate, reform."

The EU's economic outlook has improved, with an expectation that growth will be higher than forecast.

But the road to recovery is not smooth, with unemployment rates similar to those in the United States remaining steady at a stubbornly high level.

Barroso reminded the executives, government officials and academics in the audience that the EU-U.S. trade partnership remains the world's largest with 33 percent of international trade in goods and 44 percent in services, he said.

"Trans-Atlantic trade and investment is responsible for 14 million jobs in Europe and America," Barroso said.

"I hope the U.S. will not forget Europe and that Europe will not forget the U.S.," he said when asked if he was concerned about the attention and resources being drawn towards the fast growing economies of Asia.

The financial crisis of the last three years exposed cracks in the global trade system and the lack of an agreement on the latest round of talks meant everyone suffered.

"Of course, all this would have been greatly facilitated had there been an agreement on the Doha trade round already," he said. "So we will maintain momentum for a successful conclusion. In the EU alone, an agreement would boost GDP by around $40 billion."

In the second quarter, gross domestic product in the 16-nation eurozone grew 1 percent on a quarter-on-quarter basis -- the fastest pace in more than three years, according to European Union statistics agency Eurostat.

Household consumption and investment drove the growth in the eurozone's GDP during the second quarter, Eurostat data showed.

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European Commission President Jose Manuel Barroso said the European Union must focus on reforms and exit a crisis mind-set to strengthen a fragile economic recovery. A degree of cautious optimism has taken root, Barroso said in recent remarks to the Council on Foreign...
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Friday, 01 Oct 2010 01:45 PM
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