Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-05-19-Speech-3-009"
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"en.20100519.3.3-009"2
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"Mr President, I welcome this debate on the crisis response of the European Union and on the immediate and longer-term challenges of economic governance we are facing. I shall start with the immediate challenges and the crisis response.
While accelerated fiscal consolidation is an immediate priority throughout Europe, at the same time, we need to coordinate our economic and fiscal policies by applying differentiation among the Member States. In other words, the efforts of fiscal consideration need to be differentiated according to fiscal space and economic vulnerability.
Countries with little or no fiscal space will need to front-load and accelerate measures, while others with better fiscal space should maintain their less restrictive fiscal policy stances for the sake of growth and jobs in Europe.
Of course, it would be a mistake to stop our efforts here. Let us recall that the first 10 years of the euro have been a success story: that is the starting point. But the crisis has shown that we need to acknowledge its systemic shortcomings. Peer pressure has lacked teeth, good times were not used to reduce public debt, and macro-economic imbalances were ignored.
This is precisely the reason why last week, on 12 May, the Commission presented an ambitious set of proposals to reinforce economic governance in Europe. We want to strengthen preventive budgetary surveillance, address macro-economic imbalances and set up a permanent and robust framework for crisis management. I count on Parliament’s support for these important proposals. They are at the heart of making Europe 2020 a success in the coming years.
Our proposals are based on two principles. First, prevention is always better than correction – not to mention letting a situation escalate into a crisis, as we have seen. Second, stronger fiscal surveillance should be accompanied by broader macro-economic surveillance, to go to the roots and origins of sustainable economic development.
Our proposals are made of three building blocks. First, we must reinforce both the preventive and corrective arms of the Stability and Growth Pact. The essential cornerstone of reinforcing economic governance is to coordinate fiscal policy in advance, in order to ensure that national budgets are consistent with the jointly-agreed European policies and obligations, so that they will not put at risk the stability of the euro area as a whole and that of the other Member States.
Let me be very clear about this: this will not mean scrutinising national budgets, budget line by budget line. We have neither the intention nor the resources for that. Instead, it will mean analysing and peer-reviewing the broad budgetary guidelines and fiscal balance before the submission of the draft national budgets by governments to Parliament with the legal right, based on the treaty and pact, for the EU to make recommendations and ask for corrective action from the Member States concerned.
Some have criticised this, saying that this is a breach of parliamentary sovereignty. I myself am a former member of a national and the European Parliament, and I am fully aware of the sensitivities of parliamentary fiscal powers. However, everyone can see that this is not about breaching democracy or parliamentary sovereignty but ensuring that our Member States respect those very same rules which they have themselves decided on previously: in other words, to practice what you preach.
We need to introduce a truly European dimension to economic policy making in Europe: it is not enough to look only afterwards at international decisions. In the EU, in particular in the euro area, we know only too well that national decisions have an impact beyond national borders, and therefore there will have to be coordination at European level before those national decisions.
The second building block is to go beyond budgetary surveillance to broaden and deepen surveillance, to address macro-economic imbalances. Why is this important? The divergences in competitiveness and the gap between the surplus and deficit countries of the euro area has widened in the past 10 years. This has been at the root and origin of why the financial crisis hit the EU so hard, especially some of our Member States. We should prevent and tackle emerging problems before they escalate into a crisis.
Ten days ago, the European Union took bold and necessary decisions to safeguard financial stability in Europe. It was a dual response to the aggravated crisis, which had turned into a systemic challenge to the euro. It was a response that I would call a consolidation pact.
Therefore, we propose to define indicators and a scoreboard, agree alert thresholds and give recommendations and early warnings if necessary. These indicators could include, for instance, productivity trends, unit labour costs and current account developments.
It is self-evident that this does not mean that we would want to weaken the export performance of any country; of course not. Instead, it aims at rebalancing economic growth in Europe as a whole. We need to reinforce export competitiveness where needed and domestic demand where needed and possible. That is the way to play as a European team for the benefit of the whole of Europe.
Thirdly, we need to be very clear to whoever is watching the euro area that we will never be defeated. To discourage anyone from even trying our vigour, we need a permanent and robust framework for crisis management for the euro area Member States. The temporary mechanism established on 10 May is a bold first step in that direction, but for the medium to long term, the Commission will propose a more permanent mechanism, subject to strict policy conditionality and, of course, drawing on the lessons of recent experience. Yes, we need to avoid moral hazards. That is why we must make the mechanism so unattractive that no leader or country is voluntarily tempted to resort to it. But recent experience has shown that it is better to have a fire brigade ready for a possible bush fire than only start building the fire brigade up when the fire has already turned into a broader forest fire. It is better to be safe than sorry.
To conclude, these Commission proposals pave the way for a quantum leap in economic governance in Europe, but I also want to draw your attention to another immensely important decision – on the same day we proposed these measures – namely, the proposal for Estonia to become a member of the euro area on its own merits. Just to give you one figure: while the average debt in Europe is, at the moment, around 75%, in Estonia it is around 7.5% – not 75% but 7.5% – on a sustainable basis.
This proposal sends an important signal to all that the euro area will withstand pressure with self-confidence, and sustainable economic and fiscal policies will bring fruit for Member States. All in all, the Commission’s initiatives, once adopted, will lead to a substantial deepening of economic governance in Europe and to a prudent widening of the euro area. Indeed, in the EMU, it is high time to fill the ‘E’ with life.
First, we agreed on a European financial stability mechanism that provides a financial backstop for up to EUR 500 billion, which will be supplemented by IMF funding at a ratio of 2:1. Secondly, we agreed to accelerate fiscal consolidation in those Member States where it is most urgently needed.
With these decisions, Europe came up with a credible package that shows our citizens, the markets and the wider world that we will defend the euro – our common currency – whatever it takes.
We are not doing it for the sake of the mystical market forces but for the sake of sustainable growth and job creation in Europe, by ensuring that the threats to financial stability will not kill the economic recovery that is now in progress – though this is still rather modest and fragile. This is our responsibility in relation to our citizens, and we are delivering in very concrete terms. Yesterday, coordinating and managing on behalf of the euro area Member States, the Commission delivered EUR 14.5 billion for Greece, which the IMF has complemented with EUR 5.5 billion. We said we would be ready to meet the immediate needs of refinancing, and we delivered on time.
Of course, this is all conditional on a full and complete implementation of the programme designed, together with the Greek Government, by the Commission, in liaison with the ECB and the IMF.
The European Central Bank has also taken extraordinary measures to tackle the attacks we have recently seen on the euro. Beyond that, our Member States have understood the paramount importance of fiscal consolidation to ensure the sustainability of public finances and thus, preconditions for sustainable economic growth.
Last week, Spain and Portugal presented significant new fiscal consolidation measures which are important and difficult but, at the same time, are necessary steps in order to reduce the ballooning public deficits in 2010 and 2011. The Commission will present a comprehensive assessment of the adequacy of the new targets and measures in the course of the next two weeks.
Let me underline that a faster reduction of the public deficit is indeed an essential component of the financial stability package that was agreed on 10 May by Ecofin. It is equally important that both countries adopt structural reforms that will contribute to increased potential growth, especially reforms of the labour markets and pension systems."@en1
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