March 3, 2021

E.U. Monetary Official Blames Poor Communication for Market Jitters

BRUSSELS — The European Union’s top finance official said Friday that a failure by leaders to adequately explain how a second bailout for Greece and other reforms would work was partly to blame for the recent market turmoil.

Olli Rehn, the economics and monetary affairs commissioner, also suggested that more determined efforts were needed to make good on an agreement last month to expand the main bailout mechanism for the euro zone. And he promised to issue a report soon on the feasibility using so-called euro bonds as another way of shoring up beleaguered European economies.

Speaking at a news conference, Mr. Rehn suggested that E.U. leaders had failed to explain adequately the “comprehensive, detailed and technically complex” agreement on Greece reached at a summit in Brussels last month.

“There were expectations in financial markets that all elements could be implemented immediately,” he said. “While these expectations were clearly unrealistic, markets have nevertheless been disappointed.”

“All of us who are in responsible positions in Europe will have to do much better in order to ensure verbal discipline and rigor,” he said.

European officials were “working night and day to put flesh on the bones” of the July 21 agreement, he said. “Once investors understand that all this work is underway behind the scenes, they will be reassured,” he said.

“It is not as if the fundamentals of the Italian or Spanish economies have changed overnight,” he said, referring to widening spreads on Spanish and Italian bonds in recent days.

Mr. Rehn also urged member countries and national parliaments to give a final green light to expanding the lending capacity and scope of the European Financial Stability Facility, or E.F.S.F., the region’s rescue fund.

He would not enter “into the numbers game“ or guess at the future capitalization of the fund, but said the technical and political details should be completed by early September.

Mr. Rehn also said the commission’s report on common bonds guaranteed by some or all euro zone members would examine whether such bonds “could contribute to fiscal discipline and increase liquidity in the bond markets in Europe so that the countries enjoying highest credit rating standards would not see their borrowing costs” rise, Mr. Rehn said.

But the idea of euro bonds has met with deep skepticism in Germany, and Mr. Rehn signaled some caution.

“Let’s not jump the gun nor rush to conclusions in that regard,” he said.

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