China's Opportunities Amid a Rejuvenated Europe —— Dialogue with Managing Director of the ESM Klaus Regling
Klaus Regling
Klaus Regling is the first Managing Director of the European Stability Mechanism. He is also the CEO of the European Financial Stability Facility (EFSF), a position he has held since the creation of the EFSF in July 2010.
Klaus Regling has worked for 35 years as an economist in senior positions in the public and the private sector in Europe, Asia and the U.S., including a decade with the IMF in Washington and Jakarta and a decade with the German Ministry of Finance where he prepared Economic and Monetary Union in Europe. From 2001 to 2008 he was Director General for Economic and Financial Affairs of the European Commission.
During 2008-09, he spent a year at the Lee Kuan Yew School of Public Policy in Singapore where he researched financial and monetary integration in Asia. Subsequently he opened an economic and financial consultancy in Brussels.
Previously, Klaus Regling had gained experience in the private sector as Managing Director of the Moore Capital Strategy Group in London (1999-2001) and as an economist with the German Bankers’ Association. Mr. Regling studied economics at the Universities of Hamburg and Regensburg.
Briefing
In response to the invitation of Center for China in the World Economy (CCWE) of Tsinghua University, Klaus Regling, Managing Director of European Stability Mechanism, together with Christophe Frankel, the CFO, Wolfgang Proissl, Head of Communication, and Annika Melander, Head of Economic and Financial Section, EU Delegation Beijing, and Economic Counselor, among others, had an exchange and communication with experts and audience present at the meeting with regard to the current economy in the Eurozone, experience and lessons the European countries have received from the economic crisis and the part China can play in Europe’s road to recovery in Shunde Building, Tsinghua University on the night of June 3, 2015.
David Daokui Li, Director of CCWE, was present and chaired the meeting. LI Rengui, Research Fellow with the Institute of Economics, Chinese Academy of Social Sciences (CASS), ZHANG Li, Research Fellow with the Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce (MOC), SONG Debin, Vice General Manager of the Overseas Business Division of China Communications Construction Co., Ltd., (CCCC), LIU Ying, Director of the Cooperation Research Department of Chongyang Institute for Financial Studies, Renmin University of China (RUC), and LI Yan, policy analyst with OECD China, among other Chinese experts, also attended the meeting.
Mr. Regling gave an account of the causes for the economic crisis across European countries. From his point of view, a good variety of factors have resulted in the crisis. First of all, the problem comes from some member states themselves. Eleven countries joined the Eurozone in 1998 but not all of them have been conscious of the responsibility they should take. Italy and Spain, for example, once witnessed double-digit interest rates in the 1990s and neither of the two governments had been politically prepared for the substantial decline of interest rates due to the stimulation of monetary policy. Secondly, the overall regulation became problematic across the Eurozone and the dramatically limited monitoring range, the lack of effective means to measure the structure-based fiscal deficit and the frequent reporting of erroneous data by some countries, etc., all give rise to the economic disturbances in recent years. The last but not the least is the imposition of double crises. The Eurozone encountered the global financial tsunami while getting in trouble of its own, leading to an even greater impact of the present crisis and a prolonged recovery.
This was followed by Mr. Regling’s introduction of the experience and lessons generalized in Europe’s recovery from the present crisis. The first is to reduce economic vulnerability. In other words, all member states must put their debts and fiscal deficits under control. From 2008 to 2010, the debts of some member states accounted for 5-10% of their GDP, with the percentage exceeding 15% in Greece and 30% in Ireland. After some restoration in a period of time, however, total fiscal deficit in Europe was 2-3 times less significant than that in the United States and in Japan. Secondly, efforts should be made in reinforcing coordination among the member states in economic policies, establishing even more complete and strict regulations, verifying the data provided by the countries, conducting joint policy making, and even having a minister of finance in place for the Eurozone, etc. Thirdly, it is important to establish a strong European banking system, to take proactive monetary policies and to secure financial stability in the Eurozone and provide financial assistance for countries in need via institutions such as European Financial Stability Facility and European Stability Mechanism.
Regling also said, nevertheless, that the loans are not credited unconditionally and that the member states must commit to have their policies changed and take further actions to create job opportunities so as to ensure they have the ability to pay back. The two institutions have been playing an extraordinarily active role in this respect and have offered a total assistance of 238.6 billion euros to Ireland, Spain, Portugal, Greece and Cyprus. The first three countries do not need the assistance any longer and Cyprus will also have relevant programs concluded in 8-9 months. Only Greece is still deep in trouble.
With regard to the question “whether it is possible that Greece retreats from the Eurozone for the failure to reach an agreement with ESF/IMF prior to the end of the month” from an expert present at the meeting, Mr. Regling said that what the Geek Government had done was not really good and that it is now engaged in painstaking negotiations with institutions concerned for injection of funds. However, Greece is still a member of EU and a member of a big family. Therefore, the EU will try its best to offer assistance to Greece under the precondition of satisfied relevant conditions to avoid such an uninteresting result for an of its member states.
As the meeting approached to its end, Ms. Melander also made a short presentation on topics related to China that were interesting to the distinguished guests and audience present at the meeting. She believes that there is a strong interdependence between the Chinese and EU economies. For the time being, the Europe Union welcomes the Chinese investors not only to buy bonds but also be engaged in Europe’s construction of infrastructure, real properties, etc., believing that this will result in healthy competition. Meanwhile China will become a host country of G20 and then further discussion will be handled between the two parties on investment treaties, among other things.
