FORMER EUROPEAN commissioner Peter Sutherland has expressed optimism that Ireland will back the fiscal treaty, but said EU leaders’ “faltering and sporadic” efforts had complicated the challenge.
At a European Central Bank (ECB) conference in Frankfurt yesterday, Mr Sutherland said current moves to tackle fiscal imbalances were a “substantial contribution” to rebuilding confidence in the euro, but no panacea.
“The failure to articulate a credibly, convincing and positive growth vision for the future is hardly likely to foster public acceptance of the necessary fiscal discipline in state finances,” said Mr Sutherland, chairman of Goldman Sachs International.
“The fiscal compact treaty, which I am optimistic my home country will ratify next month, is clearly one element necessary to tackle the sovereign debt crisis,” he said.
As such reforms would not generate immediate growth Mr Sutherland called for additional measures to boost domestic demand in EU core countries.
His remarks come a day after ECB president Mario Draghi called for a “growth pact” across the EU, a demand backed yesterday by leaders from Italy to Belgium.
Mr Sutherland suggested that a “symmetrical structural adjustment” was required in the EU, including the liberalisation of the services sector in core countries, particularly Germany.
He warned against further uncoordinated regulatory moves by EU member states; recent efforts had exacerbated financial fragility, particularly in parched private credit markets.
“Like generals fighting the last war, there is a serious risk of regulatory overkill in response to the undoubted mistakes of the past,” he said. “A blunderbuss approach, if not moderated, will seriously inhibit even the healthiest part of the financial sector from playing its indispensable part in the recovery.”
Mr Sutherland and Mr Draghi said the long-term lesson of the crisis was to make a fresh effort to push forward with a European single market.
In his welcoming remarks, Mr Draghi said that fragmented regulatory arrangements across the continent had in the crisis “induced banks to withdraw behind national borders”.
The ECB president said current EU reform efforts, from regulatory overhaul to the fiscal treaty, marked “part of the journey, not the end of the road”.
“These reforms are significant and would even have been unlikely without the crisis,” said Mr Draghi. “However, it is also indisputable that financial integration is a process. The current reform efforts are, therefore, part of the journey, and not the end of the road.”
