FinMin: EU needs changes to handle crises

Frieden told reporters in an interview that EU finance ministers’ “ad hoc” decision to provide 500bn euros, plus about 250bn euros from the IMF in emergency loans to Greece and, possibly, others appeared to have stopped a sovereign debt crisis from spreading and should be enough for now.

But longer term the 27-nation bloc would need to amend its basic laws by setting up, for example, an IMF-style European Monetary Fund or giving the executive European Commission more permanent powers to raise capital on financial markets.

“This crisis showed that despite the fact that we were able to react… it would be worthwhile to think of something more structured that we put in to the treaty to have an instrument in place,” Frieden said on the sidelines of a World Economic Forum conference.

“This is not something we should discuss in a hurry. We can do it over the next year, there is no urgency,” he added.

Any treaty change would require unanimity of all EU countries and tough negotiations, but Frieden said the decision on the emergency package showed EU and eurozone governments are determined to protect the euro currency.

“We solved the Greece crisis and we are preventing further crises. I have no doubt whatsoever about the clear political will of all governments. They will implement it (the package),” he said.

Clear will to defend euro
“We are defending the euro and we believe in the future of the euro. All those who speculate that the euro would become weak or even inexistent currency were mistaken, there was a clear political will to strongly support the euro,” he added.

The future, permanent system could involve setting up the European Monetary Fund, an idea already floated in Brussels or giving the European Commission more powers to raise capital for aid countries in crisis.

“That is to be seen, if you change the treaty all options are on the table: the European Monetary Fund, giving more power to the Commission or an instrument in the hands of the Council (EU governments),” Frieden said.

He gave a cautious welcome to investors’ reaction to the emergency package, which sent the euro and stock markets up.

“From the first indications that we had early this morning it (the reaction) was rather positive, but we need to wait several days to make a judgment. There was an indication that we took the right step,” he said.

Commenting on suggestions by politicians that the EU should have agreed on the aid mechanism earlier, which would have made it less costly, Frieden said: “It would have been certainly an advantage if we could have taken some decisions already a few weeks ago, but the result is what matters.”