The European Union is better prepared to deal with a future financial crisis than it was in 2008 and 2011 but its reaction will still be slowed down by the decision-making process around its initiatives, Klaus Regling, the managing director of the European Stability Mechanism, told a Washington conference April 20.
European Stability Mechanism managing director Klaus Regling.
Source: Associated Press
The EU learned much from its experience in the banking and sovereign crises that hit Cyprus, Greece, Spain, Portugal and Ireland after 2008, but due to its legal structure, decision-making will likely be slow, he said.
"It could be a bit better in the future," he said, noting that it was due to the crisis that lending institutions such as the ESM were created, and which now stand ready to react to potential problems.
The ESM has the capacity to lend €700 billion to ailing sovereigns, out of which more than €300 billion is currently available.
"That will speed up things a bit but otherwise we are not one country, we are not the United States of Europe," Regling said.
"It is true that Europe's response to the crisis could have been swifter. That's often criticized in the markets and by academics, that we are too slow, and it's probably true. If we had been faster it could have been better, we probably could have saved money, but one has to understand that the 19 member states of the euro area are sovereign countries," he said, explaining that it will always be difficult and time-consuming for European countries to agree, due to the necessity to hold public debates and pass laws at home, as well as often-fraught negotiations at EU level.
"I think it's the price of democracy and one should have no illusions that this could disappear all of a sudden. It will not disappear because the 19 countries are independent."