Stephen Hester, CEO of the Royal Bank of Scotland (NYSE:RBS), said that finding a solution to the crisis in Europe could take years and eurozone economies in the south have to reform and regain competitiveness. “The question is the ability of European countries, especially in the South, to become more competitive. Meanwhile, we are talking about various patches to gain time until the effect of reforms will be felt,” said Hester in Hong Kong, in an interview with Bloomberg Television.
Leaders of the G20, the largest world economies, have urged Europe during the summit held Monday and Tuesday in Mexico, to mobilize in order to overcome the crisis and prevent further adverse effects in the global economy.
Although Sunday’s elections in Greece seem to have resulted in a “pro-euro” coalition government, which will meet the austerity measures agreed with external creditors and will keep the country in the eurozone, 10-year term borrowing costs of Spain continued to rise this week.
The shares of British banking group RBS, controlled by the government, fell by 37% last year, as the turbulence caused by the euro crisis were proving stronger than measures implemented by the bank to reduce debt, lowering costs through layoffs and relaxation of bank’s risk profile by selling assets. Hester took over as RBS CEO in November 2008, after the bank was saved from collapse by the British government intervention, which became majority shareholder. He believes the state should not sell the shares it now owns in the bank, because the time is inappropriate and the stock price is very low. “They want to sell. They have to wait until the crisis is over, until economies begin to grow again,” he said.
Participants at the G20 summit in Mexico were in favor of measures to stimulate economic growth and reduction of budget deficits in Europe, while members of the eurozone leaders pledged to take all necessary measures to protect the monetary union.
Also, Hester said that the euro will survive the financial crisis. He believes that the recapitalization of banks in southern euro area might be a false solution. “If the country is not on track, recapitalization of banks is, regardless of the amount, a waste of time,” said RBS head.
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