EXCLUSIVE

09.24.12

Barroso: The Worst of Euro Crisis Is Over

The worst is over for the euro-zone crisis, according to European Commission President José Manuel Barroso. He talks to Daniel Gross about how to win the game and ‘score goals.’ Plus, exclusive video

The Portuguese coach was emphatic about his team’s prospects. “I would say we are at the beginning of the second half, and that contrary to all the commentators we have not lost, we are not losing,” he said. “We have resisted well. And what I would like to underline now is the need for all players to stay focused, to keep the team spirit, so that we can score goals.” Forget about extra time, or penalty kicks. “I believe we will win, with a comfortable margin, this match.”

That wasn’t Real Madrid’s José Mourinho talking about the next clash with Barcelona. Or André Villas Boas, the Portuguese coach of British club Tottenham Hotspur, talking about a game against Manchester United. Rather it was José Manuel Barroso, president of the European Commission, using sporting terms to describe the European financial crisis in an interview with me on Monday.

After years of near-defaults, bailouts, failed summit meetings, and halting steps toward reform, Barroso says that the European powers have begun to wrap their arms around the continent’s daunting fiscal problems. “We are in a better situation now,” he says in the accompanying video. “So the situation is improving, but inevitably it will take time to have all the solutions because the crisis was very complex.”

In the last several weeks, the European financial crisis has seemed to come off the boil. In August the euro zone’s political leaders went on holiday, and the markets seemed to relax as well. With no politicians working, there could be no failed summits or vague communiqués. Earlier this month, the European Central Bank finally stepped up and promised to purchase government bonds of struggling companies (Spain, Italy, et al.) that formally ask for help. That move helped push the interest rates on government debt lower across Europe, fueled a stock market rally on both sides of the Atlantic, and has pushed the euro up against the dollar.

No one is saying that the moves have solved the European crisis. Barroso acknowledges we’re only about halfway through it. But the frenzied first half seems to be in the rear-view mirror. While the ECB’s move, and the creation of stabilization funds and mechanisms, seems to have halted the panic, the underlying conditions that have prolonged the crisis still exist. Europe is plagued by the specters of austerity-induced recession, labor markets and financial systems in need of reform, and less-than-perfect policy coordination between countries.

Video screenshot

In today's special installment of The Number, Daniel Gross sits down with EU chief Jose Manuel Barroso to discuss the status of the European financial crisis--and why it's too soon to give up on the euro.

Barroso believes progress is being made on all fronts, and that the focus on political differences between member states masks the real progress and areas of agreement. He points to the hard work of fiscal consolidation being undertaken in several countries, proposals to create a Europe-wide banking supervisor, and the establishment of Europe-wide financial backstops. “It’s true that we don’t have all the instruments for a common currency,” he said. And while real differences remain over policy issues, there is agreement on underlying goals. “No government is questioning the need for financial stability, for discipline, and at the same time for convergence,” he said. The slowly forming consensus has, for now, at least, taken the prospect of a Greek default and a large country leaving the euro off the table. “The way forward is for more integration that the euro is here to stay.”

Up to this point, European policymakers and political leaders have not exactly distinguished themselves in the World Cup of crisis management. And it seems the continent suffers from a dearth of financial players like Cristiano Ronaldo, the flamboyant, prolific Portuguese striker who is capable of conjuring goals from nothing. But Barroso, who coached his kids in soccer, is sanguine. “More than Cristiano Ronaldo, what you really need is team spirit,” he said. “I think this is the important issue. And to remain focused. When players feel pressure they remain committed, and they believe there is urgency. There is a risk of some relaxation.”