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José Manuel Durão Barroso

President of the European Commission

Opening remarks by President Barroso on economic governance

Joint press conference with Commissioner Olli Rehn

Brussels, 29 september 2010

The proposals we are making today represent the biggest step forward on economic governance since we adopted the Stability and Growth Pact.

Once approved and implemented by the Member States, they will mark a sea change in the way economic governance is dealt with in the European Union, and in particular in the Euro area.

When I said in my State of the Union address that there was no room for complacency, I meant it. Europe should and will deliver on the necessary reforms to secure a prosperous future for its people.

Why are these proposals really very important?

First, because we widen and deepen the governance system. Indeed, we substantially reinforce the Stability and Growth Pact and we widen surveillance beyond budgetary policy to cover macroeconomic imbalances in general.

Second, because our proposals are very ambitious: for the first time we address decisively the preventive arm of the Stability and Growth Pact; for the first time we propose that sanctions must be implemented much earlier in the process; for the first time we propose a structured system to deal with macroeconomic imbalances.

Finally, because our proposals are directly and immediately applicable to the Euro area countries, therefore addressing some of the roots of the recent crisis of sovereign debt in the Euro area.

We will consider excessive deficits and excessive debts on an equal basis. Debt is as damaging and needs to be addressed more seriously than in the past. To help member states coordinate more effectively their fiscal policies, we propose minimum requirements for national fiscal frameworks to make sure that they are in line with Treaty obligations.

The Commission will create and monitor a scoreboard of economic and financial indicators and carry out in-depth country analyses. This is not to tick the box but to make sure corrective action is taken.

The message is clear – we will pull the hand break before the car rolls down the hill.

Today's proposals are part of our broader reform agenda for Europe.

Europe is modernizing itself through the structural reforms that were agreed in the Europe 2020 agenda. By the end of the year, the Commission will have put all its proposals on the table.

We are making Europe the first region in the world to have top-notch financial supervision and regulation that is up to the challenges of the future.

We are working to ensure that Europe is social and inclusive. The strikes by workers across Europe today remind us that we must not leave behind those most in need. Essential public services must be protected.

And that is what we are doing today. The pressures we have been under since the crisis started show more clearly than ever that, as the famous saying goes, "there is no such thing as a free lunch". There is also no such thing as a "free deficit". Debt has to be reimbursed, and the money you use to reimburse debt is money you can't use to finance education, health care, pensions, to give just some examples. These should remain priorities in a Europe with an ageing population and unbalanced public accounts and excessive debt are indeed anti social

A huge public debt diverts public spending from where it is really needed.

So the measures we are proposing today are not about the Commission lecturing Member States. They are about avoiding a situation in which Member States have to punish their citizens. These proposals may not be popular with all Member States. But the Commission's job is to make sure citizens are not paying taxes today for little or no return tomorrow.

That is why we are bringing forward a set of legislative proposals to strengthen economic governance in Europe.

It is about making sure the rules are in place and are properly respected so that the financial crisis cannot happen again and citizens do not again have to pay the price. We need sound public finances and governments that live up to their responsibilities to future generations.

We have come a long way since May, when the Commission first set out its ideas. The Commission proposals have been the basis on which member states have speeded up work informally in the Task Force chaired by President Van Rompuy. Now is the right time for us to launch the legislative phase, with Council and with the European Parliament. So we can have the new system adopted by the middle of next year.

In the past, when the Commission's advice was harsh, it was not sufficiently followed by the Council. The changes I have outlined will avoid this from happening again.

At the same time, the Commission is looking at how to set an even better example by improving our own working methods. I will change the internal rules of the Commission to have a clear separation between the analytical and the political parts of our recommendations to Council. We have already reinforced the staff levels in DG ECFIN. We will introduce a double check in DG ECFIN with a fresh pair of eyes giving a second opinion on the original analysis. This will further strengthen the role of the economic and monetary affairs Commissioner and the independence of the Commission which is fundamental for credible surveillance.

To reinforce confidence in Europe's economy it is essential to keep up the momentum in our reform of economic governance. That is what we are doing once again today and I hope that the member states will respond as decisively as public opinion expects them to do.

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