The EU's monetary affairs chief said on Wednesday (26 May) Europe faced economic stagnation and political irrelevance if it did not carry out reforms and chided Germany for acting alone in banning some short-selling activities.
Olli Rehn, the European Union's commissioner for economic and monetary affairs, said the EU was at a crossroads as it tackled debt problems in Greece and other countries using the euro.
"Either we take determined and joint action for Europe's economic and political revival or we face economic stagnation and political irrelevance," Rehn told an economic conference in Brussels.
He reportedly said that it was vital for most of the 16 states in the euro zone to accelerate fiscal consolidation and praised a 24-billion-euro austerity plan announced by Italy.
"These budget cuts are very significant and go in the right direction. Such significant measures of fiscal consolidation as decided by Italy yesterday do help restore confidence in the euro zone," Rehn said.
Confidence in the euro zone as been damaged by Greece's debt problems and concerns that other countries such as Italy, Spain or Portugal could face similar problems.
Europe's image in the world damaged
The EU also faces criticism for not responding faster to the crisis, which has damaged its global image and caused falls in the value of the euro.
Asked about German moves to ban some short-selling activities, Rehn said: "We would prefer coordinated action."
"I do understand German concerns based on their long-standing stability-oriented culture and fiscal discipline," he added.
Germany caught markets and its EU partners unawares last week when the government's financial watchdog announced a ban on naked short-selling of shares of Germany's top 10 financial institutions, and of euro government bonds and related credit default swaps.
Naked short-selling involves short selling of financial instruments without first borrowing the security or ensuring that the security can be borrowed.
Germany also aims to "regulate further points" with a draft law it plans to enact, a German finance ministry spokesman said on Wednesday (EURACTIV 26/05/10).
(EURACTIV with Reuters.)