Europe Economy

'We are not heading into a crisis like 10 years ago,' head of Europe's rescue fund says

Key Points
  • Klaus Regling, the head of the European Stability Mechanism, tells CNBC that Europe is not on the cusp of recession.
  • Regling says the euro region isn't even stagnating and  “growth and potential.”
  • Amid data that suggests low growth, the European Central Bank has resumed its massive bond-buying program.
Klaus Regling, managing director of the European Stability Mechanism.
Andrew Harrer | Bloomberg | Getty Images

The managing director of Europe's bailout fund told CNBC Thursday that the euro zone has worked hard to ensure it's able to deal with future financial shocks, downplaying talk that another recession is just around the corner.

Klaus Regling, the head of the European Stability Mechanism, told CNBC's Geoff Cutmore at the IMF and World Bank annual meetings in Washington, D.C., that the euro region has "growth and potential."

"We are not heading into a crisis like 10 years ago. Nobody is arguing that. Sometimes reading the media it sounds like we are heading back to what happened 10 years ago — it's not the case. We don't even have stagnation," he said.

"But there are risks, so we have to be careful and we know in our economic system there will be a crisis from time to time. We must do everything to try to prevent it, but it happens. And it always comes from a different corner."

The European Stability Mechanism, or ESM, is a crisis resolution mechanism set up for euro area countries. It generates money by selling bonds in the global financial markets. Following the euro zone sovereign debt crisis of 2011, the ESM became integral to lawmakers and bankers as bailouts were dealt out to ailing economies.

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Rest of the world can't expect to be rescued by German economy, expert says

The European Central Bank (ECB) has just resumed its massive bond-buying program with fragile growth in the region worrying economists and market participants once more. On Thursday, the German government lowered its 2020 growth forecast to 1.0% from 1.5% and global trade wars and new autos regulations have impacted the euro zone's largest economy and the broader region.

Regling rebuffed talk that the euro zone hadn't implemented enough reforms in order to deal with future shocks. He admitted that not being in a crisis meant "things move a bit slower" but insisted that work had been done on a banking union and giving his organization additional mandates.

"We should not assume that there will never be another crisis despite all the efforts. And the efforts have been strong," he told CNBC.