Markets will discipline spendthrift governments, he said today in a speech in Tampere, Finland. All European Union members need to deliver on their obligations while the region’s economic sanctions are becoming more automatic and more comprehensive, he said.
The EU needs a process that deals with sovereign insolvencies, while solidarity in the bloc “has its limits,” Schaeuble said. There’s been a fundamental shift in how markets view sovereign debt and preventing contagion is a “tremendous challenge,” he said. Now is the time for “bold” steps in Europe, he said.
Greek Prime Minister George Papandreou yesterday agreed to step down to allow the creation of a national unity government intended to secure international financing and avert a collapse of the country’s economy.
A Greek debt restructuring without reform will not solve the nation’s woes, Schaeuble said. Europe’s most indebted nations need to fix the root causes of their problems, he said.
Euro area finance ministers meet 5 p.m. in Brussels ahead of the talks by 27 European Union finance chiefs planned for tomorrow.
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