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EU Ambassador on Debt Crisis Deal: ‘Major Step Forward’

June 29, 2012 at 12:00 AM EST
EU Ambassador to the United States Joao Vale de Almeida told Jeffrey Brown an agreement among eurozone nations that includes creating a bank rescue fund is a "major step forward" in solving the region's debt crisis.
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JEFFREY BROWN: And I’m joined now by Ambassador Joao Vale de Almeida, head of the European Union delegation to the United States.

Welcome back.

So, is it a real shift? Was it — did something important happen, a major turn? How do you see it?

JOAO VALE DE ALMEIDA, European Union ambassador to the United States: I think we all learned since the beginning of this crisis to be humble and cautious. . .

JEFFREY BROWN: Yes, we have had this conversation before.

JOAO VALE DE ALMEIDA: . . . in analyzing the steps.

But even with that degree of cautiousness, I think this is a big step, a major step, I would say, towards the solution of our problems. . .

JEFFREY BROWN: Was there — as we heard in that piece, was there a sense of crisis, that something had to be done, or some very serious things could happen as early as Monday?

JOAO VALE DE ALMEIDA: I think so.

I think the introduction is fair in saying that we were facing a difficult situation. We are still facing a difficult situation. We are not complacent about that.

I think our leaders, you know, they realize that. And they had a long meeting, well into the morning. But they came out with a set of decisions, short term and long term, that in my view qualitatively change the situation where we are today.

JEFFREY BROWN: Well, how — specifically, how does it change? If the banks are getting money directly, rather than through governments, how does that change things dramatically?

JOAO VALE DE ALMEIDA: Well, it stops the vicious circle that we had to manage between support to banks and impact on the sovereign debt.

Because the banks needed recapitalization, we were calling on member states, on countries to support the banks. This would deteriorate their financial situation. This would have an impact on their sovereign debt rating. So, in doing this, in accepting that banks can be recapitalized, supported directly from the European Union crisis instruments, and not from member states’ budgets, we are stopping this vicious circle.

And this a very important qualitatively change in the way we manage this crisis.

JEFFREY BROWN: My understanding though is that they don’t have access to that money until the end of the year or into 2013? Can it wait that long?

JOAO VALE DE ALMEIDA: I think we will now need to implement all these measures. But it’s clear that the direction has been set.

I think the markets understood today what we mean by this, the impact and the magnitude of what we have just done. So I think we are on the right track as far as, you know, again, de-linking the bank support from the sovereign debt situation. And I think this will have a fundamental — make a fundamental difference.

JEFFREY BROWN: Well, speaking of the direction, I want to speak about the larger direction for Europe here.

It was Angela Merkel who has talked about more Europe, even amidst the talk of a total fraying. Now, are we moving in that direction? And what specifically? I see talk of a eurozone treasury, something more like what we have here, with power to change national budgets. I see talk of a banking union with greater regulatory power over European banks.

JOAO VALE DE ALMEIDA: Jeff, no one is talking about less Europe. Everybody is talking about more Europe.

JEFFREY BROWN: Mm-hmm.

JOAO VALE DE ALMEIDA: Of course, there are differences on what more Europe means. Some are — they want to go faster. Some want to go slightly slower.

But everyone wants more Europe. Everyone realizes that, if Europe is to come out of this crisis stronger, we need to have more Europe, meaning we need to be more integrated. We need to transfer more sovereignty to central institutions, accept that solidarity comes also with discipline, and discipline requires solidarity.

All of this is being played in the European scene today. Let me point, call your attention to one point. We’re talking about growth as well.

Sometimes, we are criticize by too much austerity, not enough growth.

JEFFREY BROWN: Right.

JOAO VALE DE ALMEIDA: This week, the leaders agreed on a $150 billion injection not economy that would unlock further $225 billion of private investment.

This is — this is a response to those who say austerity is not enough. We believe both are necessary.

JEFFREY BROWN: Well, you have said that before, that both are necessary. But are you suggesting there is a real shift away from the — from too much emphasis on austerity? Has that happened?

JOAO VALE DE ALMEIDA: There is a chief evolution in the sense of, say, recognizing that we need to do more to support growth.

And the leaders agreed a package — they call it the growth and jobs compact, which will coexist with the fiscal compact, again, the austerity, rigor on the financial budgetary side, coupled with proactive growth financing measures.

If you put all this together with what I have just referred to about the banks and the de-linking with the sovereign debt, we can have a set of measures and solutions here that go a long way in addressing the problem.

JEFFREY BROWN: You know, there was a lot of emphasis on the things we are talking about. I didn’t hear a lot of emphasis about Greece.

Now, the Greek leaders were not — the Greek new president wasn’t there — the prime minister — excuse me — because of illness.

JOAO VALE DE ALMEIDA: Yes. Well, that explains the fact that the — in the absence of the Greek prime minister — was in hospital a few days ago — there was no discussion of Greece. But. . .

JEFFREY BROWN: But is there an expectation?

JOAO VALE DE ALMEIDA: Greece is still there.

JEFFREY BROWN: Greece is there, right.

JOAO VALE DE ALMEIDA: And some of the problems are still there.

JEFFREY BROWN: Yes.

JOAO VALE DE ALMEIDA: We have a new government who has recommitted to implementing the memorandum, the terms of the agreement.

We will have our teams going to Greece next week. As soon as the prime minister recovers, we will be, of course, having political contact. Greece has recommitted again to implement the measures. They will benefit from some of the measures that we have taken that have an horizontal general impact.

JEFFREY BROWN: So, as of the moment, because we have had these moments where we say now it looks like Greece is leaving the euro, at this moment, you are saying it looks like they are staying?

JOAO VALE DE ALMEIDA: This is not part of our agenda.

JEFFREY BROWN: Not part of the agenda.

OK. And last thing, because, as you said before, we have had these moments before, you still have to — it’s a question of sort of convincing the markets, right?

JOAO VALE DE ALMEIDA: Yes.

JEFFREY BROWN: Today, the markets were happy. We could be here on Monday, and you don’t know.

JOAO VALE DE ALMEIDA: I don’t want to speak for the markets. I want to speak for Europe.

JEFFREY BROWN: Yes.

JOAO VALE DE ALMEIDA: And what I can tell the markets today — and I think they understood so far — is that we mean business. And we are doing our homework.

And this week, we went — made — we did a major step. We took a major step forward in finding the right solutions for our programs. I think I am confident. I’m very happy today with the results of the European Council. And I — we will see in the following weeks how things develop.

JEFFREY BROWN: All right.

JOAO VALE DE ALMEIDA: But I think we entered a new track, and a positive one.

JEFFREY BROWN: All right, Ambassador Joao Vale de Almeida, thank you very much.

JOAO VALE DE ALMEIDA: Thank you for hosting me.