12th Aug 2022

Brussels: Loose talk, fear and greed to blame for crisis

  • Rehn: '[Markets] are after making money and that is driven by fear and greed' (Photo:

EU economic affairs commissioner Olli Rehn has blamed the escalation of the euro crisis on superficial market forces and "lack of verbal discipline."

The Finnish commissioner broke his holiday on Friday (5 August) to give a snap press briefing in the EU capital in order to soothe fears that Italy or Spain might go bust.

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He said both countries have sound economies and financial reform programmes but the EU's inability to communicate the merit of new bailout measures agreed in July is a major factor behind lack of market confidence in the eurozone.

"We all in Europe will have to ensure rigour in our communications and sufficient verbal discipline so that we ensure our joint message will be listened to and understood in the way we want it to be understood," Rehn noted.

"If you look at so-called market forces, or market players and perceptions, what they are after - they are after making money, and that is driven by fear and greed."

He added in his portrait of market psychology that investors were "clearly unrealistic" in expecting the "technically complex" July bailout deal to be implemented overnight.

He also tried to dispel the idea that EU officials and member state governments were lax in heading off for vacations before agreeing the details of the bailout package and seeing it ratified by the 17 eurozone countries. "My services are working night and day to put flesh on the bones of the 21 July agreement," the commissioner said.

Rehn's press briefing is the fourth attempt this week by senior EU personalities to calm bond markets.

A letter by commission chief Jose Manuel Barroso published on Thursday saying "all elements" of the July bailout deal could still change contributed to a massive drop in world stock markets. An op-ed by EU council chief Herman Van Rompuy on Monday went down badly when he said he was "astonished" by the surge in Italian and Spanish bond rates - a statement taken by analysts to mean that he simply failed to see it coming.

For their part, German and Greek leaders have in recent weeks publicly blamed each other's countries for the euro mess, while Italy's leader rubbished his own finance minister.

Rehn declined to specify which communications gaffes he was referring to, but he defended the Barroso letter. "President Barroso's first and foremost objective with this letter was to speed up the implementation of the agreement of the 21st of July," he said.

He promised that in future he will only communicate "when there is something to communicate" in terms of concrete developments on the July deal implementation. But his own speech on Friday did not report anything new.

Rehn added that the EU risks damaging its own credibility if MEPs and EU capitals fail to quickly pass the so-called 'Six-pack' of new laws on joint economic governance.

In an echo of the recent US stand-off between the Democratic and Republican parties on borrowing capacity, the EU parliament and EU countries are delaying the bill due to an inter-institutional dispute over voting rights. "Frankly, no one will understand if adoption of this package is further held up by disagreement on this," Rehn said.

With some 80 percent of EU staff currently on holiday, commission sources told EUobserver there is no plan for the two sides to meet before the end of the summer break.

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