Podcast: In The Room
Klaus Regling: "Now maybe we're a bit spoiled"
Before the EU’s massive budgetary response to Covid, nothing had come close to the scale of the “firewalls” built to contain the euro crisis in 2010-12.
At the time, the White House and the International Monetary Fund kept telling the Europeans to “go big” even though, between them, the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) had a combined lending capacity of almost €1 trillion.
"I would argue we ‘went big’,” says Klaus Regling, the man who ran the two funds from 2010 until October 2022. "Those are big numbers – particularly in those days. Now maybe we're a bit spoiled because NextGenerationEU has €850 billion but, at the time, those were very big numbers".
When he took on the job in June 2010, the veteran German official couldn’t have started smaller. The EFSF had nothing but a name, a legal basis, and a host government (Luxembourg). "It was decided within hours that I should become the CEO of the EFSF,” says Regling. “I started almost immediately – working without any staff, with no office, just using my private telephone and laptop. And then, from July 2010, I got a few people from the [European Central Bank], the [European] Commission, the [European Investment Bank], and we started recruiting. And everything had to happen very quickly because, only six months later, there was a request to give a loan to Ireland and we had to issue a bond to finance that credit. And that was only possible by then because we had achieved a triple-A rating from the rating agencies. So I spent about three months of my life only negotiating with rating agencies whom I had told earlier, in speeches, that they had been too liberal giving triple-A ratings to all kind of dubious products".
By the time he retired from the ESM five months ago, Klaus Regling had worked as a policy-making economist for nearly 50 years in Europe, Asia, and the US. This included a decade with the IMF in Washington and Jakarta and another with the German finance ministry, where he was a key figure in designing Europe’s monetary union. From 2001-08, he was the European Commission’s director general for economic and financial affairs. Between his public-sector roles, he was managing director of the Moore Capital Strategy Group from 1999-2001.
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In The Room is a series of conversations with officials who played crucial (often behind the scenes) roles in the history of the EU.
Edited and produced by davidstudio.