Solidarity needed in Eurozone to regain trust

Central Bank of Cyprus Governor and ECB Council member Athanasios Orphanides has said that the trust which the Eurozone had enjoyed in the past is now severely damaged due to the fact that cooperation and solidarity among its member states has been collapsing over the past two years.
Addressing the annual lecture organised by the Cyprus Economic Society held at the bank of Cyprus in Nicosia, Orphanides said that the Eurozone has to convince investors and this can be achieved when the Eurozone immediately implements – in a strict manner – the new fiscal contract without the delay demonstrated in the past two years as regards the management of the crisis.
Orphanides noted that above all what is required is to finally demonstrate the necessary mutual solidarity among the member states. He recalled the words of former German Chancellor Helmut Schmidt who said that this is legally binding for the member states through articles 3 and 5 of the Treaty.
The Governor said that although European leaders have changed tack by announcing on December 9, 2011, a change in the overall decision to absorb losses from the private sector (PSI) in cases where a state is facing liquidity problems, “investors are not convinced''.
He noted that not even the “important steps in terms of governance of the Euro with the fiscal contract seem to fully restore confidence”.
Orphanides pointed out that since late 2011 some people were questioning the survival of the Euro, noting that until then it was not only Greece that was facing problems.
“A number of member states had encountered difficulties refinancing their debt or completely lost access to markets, despite the unprecedented fiscal adjustment programmes'', he stressed.
Commenting on what went wrong and caused the dramatic erosion of confidence, Orphanides said that apart from financial irregularities, loss of competitiveness, etc, the main cause of the crisis spreading to so many countries of the Euro has shown the lack of planning in the Euro area.
''The problem lies mainly in government. EU leaders failed to persuade that they can address the problem effectively,'' he concluded.