Europe Economy

Euro Zone Must Press On With Reforms: Rehn

European economic commissioner Olli Rehn at the World Economic Forum.
Photo: Vincenzo Pinto | AFP | Getty Images

Europe has made "tangible" progress in reforms that have helped to rebalance the euro zone economy, but the currency bloc must continue with these efforts to restore confidence, says the European Union's top economics official Olli Rehn.

Rehn, in an opinion piece in the Financial Times on Tuesday, said decisions made so far on the national and European level have worked and begun to rebuild confidence, calm markets and counter fears of a collapse of the euro.

But more reforms and deeper integration among European nations are still needed, says Rehn, vice-president of the European Commission and responsible for economic and monetary affairs and the euro.

"In order to overcome the crisis and restore confidence, we must continue to remove structural obstacles to sustainable growth and employment; pursue prudent fiscal consolidation; and turn bold thoughts into convincing actions when redesigning and rebuilding our economic and monetary union," Rehn wrote.

"In short, we need to stay the course and pursue decisive reforms in our member states and deeper integration in the euro zone."

A number of euro zone countries, such as Spain and Greece, have implemented austerity programs this year to help keep their finances under control.

And since European Central Bank chief Mario Draghi pledged in July to do whatever it takes to save the euro zone from collapse, the bond yields of those countries in the periphery such as Spain have fallen.

Italy recently sold 10-year debt at the lowest yield since 2010. That was the market's recognition that Prime Minister Mario Monti's government is resolute in wanting to boost competitiveness and pursue sound public finances, Rehn wrote in the editorial.

"With Italian bond yields on the rise again after Mr Monti's decision to stand down, it is also a reminder of the need to maintain resolve in the future," Rehn said, referring to a surprise announcement at the weekend that Monti will resign as Italian Prime Minister.

Italian government bond yields jumped on Monday after Monti's decision to step down early raised concerns about the pace of economic reforms in Italy. Monti is credited with having stabilized Italy's debt markets since replacing former premier Silvio Berlusconi late last year.

Rehn also said the European Commission intends to explore further ways to accommodate public investment in its assessment of national fiscal plans. The EU's pact takes into account evolving economic conditions in each European country, he wrote in Tuesday's editorial.

"If growth deteriorates, a country may receive extra time to correct its excessive deficit, provided that the agreed consolidation effort is being made. Such decisions have been taken this year for Spain, Portugal and Greece," he wrote.

In line with his call for deeper integration within the region, Rehn on Friday urged European finance ministers and leaders meeting in Brussels this week to try to bridge their differences over how to supervise banks in the wake of the financial and euro zone debt crises.