Regling: It's ‘wrong’ to say crisis will end euro
Published 01/12/2010 | 11:54
Klaus Regling, chief executive officer of the European Financial Stability Facility, said the region’s debt crisis does not mean the end of the euro.
“We do have problems in Europe. There is continued uncertainty and tension in sovereign debt markets,” Regling said in a speech in Singapore today.
“You may think and you sometimes read that Europe is in chaos, disintegrating, the euro about to disappear. This is wrong.”
European authorities approved an aid package for Ireland on November 28 after it became the second euro-area nation after Greece to seek financial help.
The assistance followed a surge in bond spreads among Europe’s so-called peripheral nations that raised concerns the debt crisis may spread across the currency zone.
“Europe has taken action over recent months to tackle sovereign debt issues in the euro zone and it has shown that it is serious about the protection of the euro,” Regling said.
He also said that rising bond spreads in some euro nations may have reflected a “flight to safety based on overall market uncertainty,” and people should be “very cautious” about interpreting these as an increasing risk of default.
The premium investors charge to hold Irish 10-year debt over German bunds, Europe’s benchmark, was at 661 basis points today after widening to a euro-era record 680 basis points yesterday.
The yield spread for Portugal narrowed to 415 basis points from 430 yesterday. It reached a record 484 basis points on November 11.
“The International Monetary Fund and OECD have argued that the default risk implied by market developments is exaggerated,” Regling said.
“The volatility of headline risk indicators tends to overshadow the substantive progress which has been achieved in the European integration process, its governance and architecture during the crisis.”