Australian Treasurer Wayne Swan called on Europe’s policy makers to stop squandering opportunities and make potentially unpopular decisions needed to stabilize the region’s fiscal crisis.
“In a pattern now all too familiar, European politicians are still well behind the curve, having failed to take advantage of the months of relative calm,” Swan said in the text of a speech to be delivered at a Euromoney forum in Sydney today. “Put simply, what is required is some basic political courage.”
Swan criticized European lawmakers for failing to pursue more aggressive policies before the latest turmoil in markets from Athens to Madrid and said they must act now to boost growth and support job creation. He contrasted their inaction with Australia’s history of “muscling up” to challenges and said his country, among the developed world’s fastest growing, is “now more than ever an island of certainty in a sea of volatility.”
European policy makers face a series of hurdles in the coming days as bond investors spurn the 100 billion-euro ($125 billion) aid package for Spanish banks that the European Central Bank said this week would bolster financial stability. Italy is due to sell bills and bonds at auctions this week while auditors are due to report on the extent of Spanish banking losses from next week.
Greeks will vote in three days on whether to back Alexis Tsipras, whose Syriza party wants to scrap an austerity plan dictated by the European Union and the International Monetary Fund as a condition of its bailout. New Democracy leader Antonis Samaras, who supports the rescue conditions, said backing Tsipras will see Greece effectively thrown out of the euro.
“There is no escaping the conclusion that Europe has a long and painful road ahead -- with the most likely scenario being rolling crises and volatility,” Swan, who was named as Euromoney magazine’s finance minister of the year in 2011. “Leaders are elected to lead, and that’s what Europe’s leaders must do.”
Europe’s crisis poses a risk to the Australian economic outlook because the common-currency area is the biggest export destination for China, Australia’s largest trading partner. Australia’s unemployment rate last month was 5.1 percent, compared with the most recent readings of 6.7 percent in Germany, 8.2 percent in the U.K. and 10 percent in France, according to Bloomberg data.
Swan praised the issuance by Australian banks of covered bonds, which are asset-backed notes that stay on a seller’s balance sheet.
“Access to this new, more resilient issuance class -- so far issued in five different currencies apart from our own -- has been critical in helping our financial institutions weather heavy market turbulence,” he told the Euromoney Australasian and Asian covered bond forum.