The CEO of the European Financial Stabilisation Fund (EFSF), Klaus Regling, in India to deliver the inaugural IISS-Oberoi lecture in Mumbai, believes that Europe has turned the corner in its sovereign debt crisis. Excerpts from an interview:
On the present status of the Euro crisis
While we are not out of crisis yet, but there is more progress than people are aware of. There is fiscal consolidation in many countries, they are improving their budget deficits, their competitiveness is improving - these things are not well known but they are getting done. In two to three years we will back to growth.
On changes in banking:
Direct bank supervision, which was mainly done at the national level, will now be done by the European Central Bank (ECB). The principle of supervision has been accepted but the scope and nature of that supervision is still under discussion. Another element, a common deposit insurance scheme, has not been approved yet.
On EFSF and the new ESM:
Without the assistance of the European Financial Stability Fund (EFSF), Ireland would have left the monetary union by now, something that would have been terrible for the euro zone. Now Ireland's economy is on the path of recovery. So the fund has played a constructive role.
But the European Stability Mechanism (ESM) will be a real international institution. It will raise 80 billion euros, the biggest paid-up capital base for any international organisation.
On the politics of the euro crisis:
To the casual observer it may seem we have only controversies and few conclusions. It should not be a surprise that 17 countries have a lot of debate, at home in their respective legislators and then among themselves. Claims that German Chancellor Angela Merkel is facing domestic problems because of her handling of the crisis are mythical.
On India's contribution to the euro crisis firewall:
The contribution of India and other emerging economies to the IMF's euro crisis "firewall is much appreciated in Europe. It makes sense for the emerging economies like India to provide support to the IMF.