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European Commissioner for Economic and Monetary Policy
Debate on the euro area
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Brussels, 5 May 2010
Madam President, let me thank you for a very rich and responsible debate this evening. Let me also correct one claim concerning President Barroso. He did express his condolences on behalf of the Commission. I want to join him and express my condolences to the families and friends of the victims of violence in Athens today. Disagreement in democracy is normal, but recourse to violence is never acceptable.
Sustainable growth and job creation is indeed at the heart of Europe 2020 and I want to say some words about financial stability, which is a necessary condition of returning to sustainable growth and to the goals of Europe 2020. You may call it ‘Europe 2010’, because we need that in order to succeed as Europe 2020.
The decision of the euro-area Member States last Sunday to activate the mechanism of coordinated and conditional financial assistance for Greece was not an easy decision, but a necessary decision. It was the responsible and right thing to do. The Commission’s task now is to ensure that the bilateral launch will be coordinated and that conditionality will be systematically and rigorously applied.
The financial support gives Greece breathing space to restore the sustainability of its public finances, as well as its overall economic competitiveness. This is needed not only for Greece, but in order to safeguard financial stability in Europe, to avoid the bush-fire in Greece turning into a forest fire in Europe. Financial stability is necessary for Europe’s ongoing economic recovery for sustainable growth and job creation.
Some of you mentioned the contagion effect and concerns related to other countries of the euro area or of the European Union. No one can deny that there have been tensions in the financial markets in recent days and weeks but, as in all financial markets, there is significant overshooting. All euro-area Member States are taking measures to consolidate their public finances, not least Portugal and Spain.
Greece is a unique and particular case in the euro area, and now the European Union. Specifically, the euro-area Member States, together with the Commission, ECB and IMF, are taking care of the Greek case. I am confident that we will succeed and overcome the formidable challenges.
We must also learn the lessons of the crisis; that is important for economic governance of Europe 2020. The latest developments in the European economy, not least around Greece, have shown that there is a pressing and urgent need to strengthen economic governance in Europe. Next week the Commission will make concrete proposals on how we can reinforce economic policy coordination and Member States budgetary surveillance in the European Union.
In the Economic and Monetary Union the ‘M’ has been much stronger than the ‘E’. It is high time to fill the ‘E’ with life. This was also the underlying idea of the founding fathers of the Economic and Monetary Union. Our guiding principle is that prevention is always more effective than correction and, therefore, we will build our proposals on the basis of reinforcing prevention, as well as correction also. The main building blocks of our proposals are threefold.
Firstly, we need to reinforce the Stability and Growth Pact, both its preventive and corrective arms. We need a more systematic and rigorous preventive budgetary surveillance, so that cases like the Greek case will never happen again.
Secondly, we must go beyond budgetary surveillance. We need to address macro-economic imbalances and divergences in competitiveness and, therefore, we need to reinforce both export competitiveness, which is urgently needed in many countries, and domestic demand where needed and possible.
The third building block will be a crisis-resolution mechanism. The financial mechanism for Greece serves the immediate need for the current purposes. However, it is clear and necessary that we need to set up a permanent crisis resolution mechanism with strong in-built conditionalities and also disincentives for its use. As President Barroso said earlier today, it is better to be safe than sorry, and ensure that we are also equipped to face the worst scenarios.
In conclusion, I count on your support. I count on the European Parliament to support reinforcing economic governance in Europe. I also call on the Heads of State and Government of the euro-area Member States on Friday, as well as the European Council more broadly, to support our proposals and proceed rapidly without delay in making these proposals effective and a reality. Why so? Because we have no luxury of time and, instead, I urge everyone to take decisions as soon as possible, so that we can make Europe 2020 a success and create real foundations for sustainable growth and job creation in Europe. That is what our citizens are expecting from us.