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José Manuel Durão Barroso
President of the European Commission
Statement by President Barroso on Reinforced economic policy cooperation
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Joint press conference with Commissioner Olli Rehn
Brussels, 12 May 2010
Good afternoon ladies and gentlemen,
On the 7th of May 2008 when we celebrated ten years of Economic and Monetary Union, the Commission issued a document. And at the time we said and I quote: "The euro area’s governance and coordination of economic policies must be improved. This will involve both deepening and broadening economic surveillance arrangements to guide fiscal policy over the cycle and in the long term and, at the same time, address divergences in growth, inflation and competitiveness."
And I draw your attention to that document, because before this crisis, the Commission was already making strongly the case for the need for increased policy coordination, the enforcement of governance of the euro area and further coordination of economic policies. At that time it was not so fashionable to speak about these issues. Today people accept it more openly. I think now we have the conditions to do it, because it really must be done now.
Europe has been dealing with an immediate emergency, but we must also show we are serious about the more fundamental reforms needed. We must now get to the root of the problem.
The history of European integration shows that, at times like this, Europe can make significant progress. Today, the Commission is seizing the moment to reinforce economic policy coordination and ensure more fiscal discipline in Europe.
What we propose is centred around three main pillars. I will ask Commissioner Olli Rehn to set these out in more detail in a moment, but let me make just three general points.
Firstly, we want to reinforce the Stability and Growth Pact. The rules and principles of the Pact are sound, but we need to make sure they are respected. This is why we propose a more upstream surveillance of the national budgets. This is about giving a sensible European perspective to Member States in the preparation of their budgets. This is to give to national parliaments the capabilities sometimes they are lacking in terms of this European information. We also include the possibility of imposing interest-bearing deposits for Member States who are making insufficient progress towards their budgetary medium-term objectives in good times. In the corrective part of the Pact, we propose an earlier and speedier use of the Excessive Deficit Procedure, as well as a more rigorous and conditional use of EU expenditure.
Secondly, we must go beyond budgetary surveillance and address the macro-economic imbalances between our Member States. Our economies grow both by what we sell to others and what we consume ourselves. Hence, both competitiveness and domestic demand are drivers of our prosperity. We have seen how strong divergences between Member States undermine cohesion, especially within the euro area. We should detect these imbalances before they occur and will make recommendations so that Member States take the necessary actions to remedy them. This is not to make the more competitive less competitive, it is to make the less competitive more competitive.
Finally, we want to put in place a robust crisis management framework for the euro area. You know that even before this crisis the Commission had flagged the idea and now with the experience of last weekend we have a basis, we have a clear basis to come with some proposals. It's now clear that we are more interdependent than ever before. Financial difficulties in one euro area Member State have spill-over effects in the others. And indeed outside the euro area, and indeed we have seen also on the global markets. We had been working on the blueprint for this kind of mechanism for months in fact. And the agreement last weekend on the stabilization mechanism that the Commission has proposed has demonstrated our commitment to go beyond ad hoc solutions. Drawing on that experience, the Commission will work towards establishing a robust crisis resolution mechanism.
These three pillars, which are interlinked, are what I have been calling a Consolidation Pact. They are the foundations of a strong European economy. So, we should not only speak about financial assistance, we should also speak about further consolidation, further rigour in the implementation of the Stability and Growth Pact.
A final word on an important decision that we took today as well. Our recommendation on Estonia's readiness to join the Euro. Today we are clear that Estonia meets the conditions and should join the Euro on 1 January 2011. In all this debate, let's remember: nobody wants to leave the Euro, and others are seeking to join.