EU's Van Rompuy warns over complacency in euro debt crisis

Sun Mar 4, 2012 9:16am EST
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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.   Continued...

European Council President Herman Van Rompuy holds a news conference at the end of a European Union leaders summit in Brussels March 2, 2012 .                       REUTERS/Sebastien Pirlet