AMSTERDAM (Reuters) - European Council President Herman Van Rompuy warned against complacency in handling the euro zone debt crisis and stressed the need for meeting budget rules and reducing deficits.
“The crisis is not yet fully over. We have come into calmer waters, true, but the next two years we have to make sure this crisis can never repeat itself,” Van Rompuy told Dutch television program Buitenhof on Sunday.
An agreement for stricter budget rules, signed by European leaders on Friday, and a 1,000 billion euro ($1.3 trillion)liquidity injection by the European Central Bank (ECB) had helped to stabilize financial markets, Van Rompuy said.
Discussions about the euro zone’s disintegration had died down but governments still needed to reduce budget deficits and make plans to strengthen economic growth, he said.
“If a plan does not meet demands we will take sanctions. That has never happened in the union. We have to make this credible otherwise the crisis will repeat itself.”
As Council president, Van Rompuy chairs and prepares meetings of European Union leaders, working to build agreement among them, a role that has put him at the centre of efforts to resolve the debt crisis since his appointment in December 2009.
Van Rompuy warned that countries which would not meet deficit reduction targets might pay more for debt financing.
“One can think to take it easy with budget targets but financial markets can respond to this badly. What one hopes to gain by fewer budget cuts one loses by higher interest rates (on debt),” he said.
Spain set itself a softer budget target for 2012 on Friday than originally agreed under the euro zone’s austerity drive, and the country’s long-term cost of borrowing rose after the news.
Asked about a call from a Dutch politician and government ally, Geert Wilders, to hold a referendum about leaving the euro zone, Van Rompuy said such an exit would be the end of the EU.
“If one left the euro zone the Netherlands would not be the only country, and the euro zone would fall apart. Then the whole union would fall apart,” he said.
Dutch Freedom Party leader Wilders, who opposes euro zone bailouts and supports the Dutch minority government, on Saturday called for a referendum to let citizens choose to return to the guilder or keep the euro.
Dutch Prime Minister Mark Rutte, who relies on opposition parties to approve euro zone bailouts, opposes the idea of returning to the guilder, saying it would be disastrous for the Netherlands’ export-oriented economy.
A majority of the Dutch parliament has repeatedly supported bailouts and other rescue measures, citing the economic importance of having a single currency and the dangers of a euro zone country going bankrupt.
($1 = 0.7573 euros)
Reporting by Gilbert Kreijger; Editing by David Holmes