THE Australian government has intensified its rhetoric on Europe, warning policymakers not to waste an opportunity to ease its sovereign debt problems after a better than expected election result in Greece.
Local financial markets breathed a sigh of relief on Monday after Greece’s two main pro-bailout parties won enough votes to form a government, easing fears it could dump the euro currency and reject internationally agreed austerity measures.
The Australian Dollar rose above $US1.01 for the first time in a month and the sharemarket gained around two per cent on the result, which also dampened expectations of the need for a further interest rate cut by the Reserve Bank of Australia in July.
But Market Economics managing director Stephen Koukoulas said the election outcome was a “temporary solution” toward preventing a potential exodus from the eurozone.
“Short-term, it’s very encouraging news that the eurozone is going to hang together,” he told AAP.
“But longer term, how do they grow the economy, how do they fix their fiscal position, and calm the markets further down the track?”
Finance Minister Penny Wong welcomed the Greek result but said Europe still had to resolve issues in its banking sector, which has recently seen credit ratings downgrades of a number of financial institutions.
“They need to … secure the banking system to ensure growth,” she told reporters in Canberra.
“Obviously these are ultimately issues for the Europeans, but they are issues that bear upon all of us.”
Treasurer Wayne Swan made a ministerial statement to parliament, saying there must be a pan-European approach to address the crisis “once and for all”.
Europe needed to outline and deliver credible fiscal plans to boost consumption and investment in the short-term and deliver sustainable budgets is the long run.
“The idea that you must choose between growth and fiscal consolidation is false,” he said.
In Mexico for the Group of 20 nations leaders’ meeting, Prime Minister Julia Gillard said Australia, which has an expanding economy and is on track to produce a $1.5 billion surplus in 2012/13, was a model for achieving that goal.
Mr Swan warned there will be continuing volatility in Europe for some time yet.
“I do not accept that the pace and scale of action to address it has been adequate,” he added.
Shadow treasurer Joe Hockey ridiculed a letter sent by Ms Gillard and Mr Swan to their European counterparts urging them to get their financial and fiscal positions in order.
“What we in the coalition would suggest is the prime minister and the treasurer should do less ink-based diplomacy, lecturing the Europeans with vague generalities about what they should do,” he said.
“They should spend more time focusing on addressing the vulnerabilities that they themselves have created for the Australian economy in the event of a further downturn in the developed world economy.”
The G20 meeting at the Mexican resort town of Los Cabos begins on Monday local time and is expected to canvass ways to secure the global economy and endorse more funding for the International Monetary Fund to bail out debt-challenged European countries.