Europe’s “deep pockets” should keep currency speculators from betting against the euro or any of the 17 member countries of the Eurozone, Didier Reynders, Belgium’s minister of finance, told GlobalAtlanta in an interview Jan. 13 in Brussels.
He acknowledged, however, that his warning comes at a time when the Eurozone’s finance ministers are grappling with how to solve the sovereign debt crises that have shaken up members of the currency bloc, particularly Greece, Ireland and Spain.
Belgium also faces political problems since its parties have been unable to form a government over the past seven months, hurting its status with the bond rating agencies. Despite his dozen years in the post, Mr. Reynders is actually a caretaker minister until a new government is formed.
The country maintains an important role historically as a mediator between the northern and southern members of the Eurozone and currently because it recently held the presidency of the European Council during which many financial reforms were negotiated.
Mr. Reynders also said that Belgium’s high-savings rate and incentives for further investment in its thriving sectors such as pharmaceuticals and logistics will keep its economy growing and able to withstand the current financial turmoil caused by the deficits of some of its members.
The interview was held at the Ministry of Finance the day following Mr. Reynders’ announcement that Belgium’s budget deficit for 2010 had shrunk to 4.6 percent of gross domestic product, an improvement over its set goal of 4.8 percent for the year.
He also announced that the overall debt-to-GDP ratio rose less than the projected 100 percent or more to about 97 percent.
He was pleased with the announcement, enhancing his role as a mediator among Eurozone members Germany and the Netherlands in the north and the countries to the south. Germany and the Netherlands along with France, Austria and Luxembourg have the highest ratings of the euro region nations on their long-term debts.
Belgium’s improved figures set the stage for the meeting of the zone’s financial ministers in Brussels Monday and Tuesday of this week (Jan. 17-18) during which they are to discuss the possibility of providing more rescue funds.
The funds are to help the region’s heavily indebted nations through buying bonds on the primary market, bond swaps and other credit lines.
As proof of Europe’s deep pockets Mr. Reynders pointed to the “trillions” of dollars or euros that were raised to weather the banking crisis over the past few years.
“When you are looking back to the bank crisis, we have put on the table not billions but trillions of euros or dollars,” he said.
“It was the first time, maybe, in history that we were using such a word: 3, 5, 10 trillion U.S. dollars or euros. Why? If you put out so much money as a guarantee of recapitalization you prove to the market that it is impossible to fight against that.”
Nevertheless, Mr. Reynders acknowledged the severity of the crisis because of the inability of European nations to control the budgets of its individual members.
He harkened back to the early days of the United States when the Congress had far less power to determine a national budget than it does now, and said that European institutions also must gain control over the budgetary processes of its member states.
In addition, he said that the critical dilemma for the Eurozone members in financial difficulty is that they are saddled with large debts while they need to stimulate the growth and competitiveness of their economies.
Mr. Reynders has pushed for increasing the bail-out funds substantially to allow the debt ridden countries to pursue growth strategies and curb unemployment through investments in education and research and development.
He also praised the reforms negotiated during Belgium’s presidency of the European Council. Among them are the creation of a European Systemic Risk Board and three new supervisory authorities: the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority.
Aside from overseeing Europe’s financial systems, they are to work with a new group in the European Central Bank that will keep watch for other risks such as a property price bubbles like those which have caused such havoc in recent years.
Confident that these reforms will help keep Europe’s finances in order, Mr. Reynders isn’t as optimistic about the adoption of similar measures in the U.S.
He also cited lingering concern that the U.S. would allow the collapse of financial institutions in the future as it did the financial services firm, Lehman Brothers Holding Inc. in 2008.
Mr. Reynders also serves as deputy prime minister.
GlobalAtlanta publisher, Phil Bolton, recently visited Brussels to interview Mr. Reynders; Philippe Maystadt, president of the European Investment Bank and Stephen Vanackere, Belgian’s minister of foreign affairs. Articles based on the interviews will be posted on www.globalatlanta.com in coming days along with videos and recordings of the full interviews.