“Unemployment still threatens eurozone’s recovery”

No matter how quick or slow the eurozone’s recovery is, unacceptably high unemployment will remain as a “pall hanging over the eurozone’s economic medium-term future”, Finance Minister Edward Scicluna has told Times of Malta Business.

The eurozone unemployment rate is currently 12.1 per cent.

Prof. Scicluna was asked for his reaction to the fact that the recession in the eurozone is finally over and leading indicators point to a continuing recovery through the summer and autumn. Asked how confident he was that the eurozone will continue along the path of recovery, he replied:

“We would be foolish to believe that, after this financial, economic and sovereign debt crises, the European Union can look forward to business as usual. Malta can potentially escape this vortex in view of its size. But it needs to be smart by getting its act together, something the Government is keen to be.”





Asked how much of this eurozone recovery was due to European Central Bank president Mario Draghi’s commitment to “do whatever it takes” to save the euro and also to the gradual relaxation of austerity policies in the euro area, Prof. Scicluna said Mr Draghi put a degree of clear thinking and monetary policy pragmatism into the equation.

“The world at large was not scared by the European Union’s policy of austerity, which by and large was appropriate for some particular countries, as much as the quasi religious fundamentalist policy preached by its biggest members and expected to be applied universally by all the members of the EU.

“This rigid philosophy also shut itself out of more sensible solutions including early changes to the eurozone architecture itself. Having said that, this crisis is unprecedented and it tests the leadership skills of even the best hard-nosed heads of state,” he said.

Regarding whether he was concerned a military strike on Syria could plunge the world into an economic crisis, Prof. Scicluna said nobody can forecast what a military strike may lead to.

He added, however: “This particular strike is not intended to be carried out in self-defence but as a deterrent. Deterrent policy, unlike a purely retributive one, is based on the calculus that the benefits to the striker as a result of this action are higher than the costs involved. So by default at this point in time the risks of a global economic downturn due solely to this action appear remote.

“It is unfortunate that we live in a world where there is no real and effective international authority to uphold international law and order. What we have is a second best solution. This will always remain messy.”

On the possibility of another Greek bailout, as suggested by German Finance Minister Wolfgang Schaeuble, the IMF and Greek Finance Minister Yannis Stounaras, and Malta’s position should such a request be made, Prof. Scicluna said Malta, like any Eurogroup member, would seek all the clarifications needed before a decision is taken.

He said: “Malta’s interests lies in the quick resolution of the eurozone crises. After the great fall we need to stand up as quickly as we can and get on with our future. Having said that, we would strive to avoid any hair-cuts. As it is structured now, the European Stability Mechanism may make loans without the need for further direct national loans.”



– Thursday, 5th September, 2013.

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