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José Manuel Durão Barroso

President of the European Commission

Opening remarks on the forthcoming European Council

European Parliament Plenary Session

Strasbourg, 20 October 2010

Mr President of the Parliament, Mr. President of the Council, Honourable Members of this House,

Today we are debating first of all the issues that will be addressed next week by the European Council. I will concentrate on what I believe are the most important topics: Economic governance in the European Union and, externally, apart of course from the very important summit with the United States, and the summit with Russia, what are believe are the critical summits, the Summit in Seoul of the G20 and the conference in Cancun, on climate change.

The reform of our economic governance is a cornerstone of our sustainable recovery and our credibility.

This is why the Commission has taken a very ambitious approach since the beginning of these discussions.

The proposals submitted by the Commission last month seek to translate the urgency deriving from the crisis into an ambitious legal reality. They tackle the key issues of giving the EU real clout in economic policy through adequate coordinated fiscal surveillance and in addressing macroeconomic imbalances.

In other words, as we have said very often, creating a real economic union in Europe.

I very much welcome the attention that the European Parliament is paying to these proposals. An early first reading agreement would prove that the European Union is committed to putting its new vision into action. We should look to have these rules in place by the middle of next year.

I therefore urge Member States to go all the way towards these important goals and to pursue this agenda as a matter of urgency.

We have, by now, moved towards a stronger consensus on the key areas for action: reinforcing the Stability and Growth Pact and dealing with macroeconomic imbalances. Thanks also to the proceedings of the Task Force under the presidency of Herman Van Rompuy.

Once all discussions are finished and all decisions are taken, the result of this combined process should be a vision for economic governance which should be much more comprehensive, much more attuned to the need to prevent problems in the first place, and much more solidly based through the use of sanctions.

But let me be clear: the overall result must represent a real change from the current situation.

We must show to our citizens that the European Union has been drawing all the right conclusions and learning all the lessons from the crisis.

Some other issues still need to be settled:

One issue of particular importance is how to replace the current crisis mechanism agreed in May, by a mechanism of a more permanent nature once it comes to its end in 2013.

We will of course do everything to avoid facing such a crisis ever again. But we will also do all we can to be better prepared for critical developments than those we faced last time. Preparedness and the presence of a robust and permanent crisis mechanism can prevent such developments from arising in the future.

The Commission takes good note of the views expressed by Member States that favour a treaty change for which unanimity of the Member States is required.

At this stage, the Commission will concentrate on working on the substance. By this we mean the design of a permanent mechanism that can provide defences in critical moments, whilst at the same time minimising moral hazard, and making sure that such an instrument will only be used as a last resort in the common interest.

If, and when realised in full, the result of all this work will be what we need: a system that provides incentives for Member States to conduct sound economic and fiscal policies; and a system that provides incentives for investors to observe responsible lending practices.

Overall I believe we are on track, we have been learning lessons from the crisis.

For the sake of its citizens, the European Union is putting in place a system of governance that is completely renewed when compared with the state of play before the crisis and now we are putting the whole system on a much sounder footing.

Honourable members,

Our track record on economic governance but also on Europe 2020 and financial regulation will give us the right platform to go forward to the G20 in Seoul.

This Summit comes at a critical time. It will be a real test whether the G20 can deliver the coordination the world economy needs, through cooperative solutions at global level. I believe it can, and I believe that the EU will play a key role in making Seoul a success. What do we want to achieve in Seoul?

First, we need to remind ourselves that the G20 did play an important role in addressing the crisis. It did so through acting collectively. And as we move into a new phase, we need to continue to act collectively, cooperatively. That means accepting that global imbalances are a concern for all, and that all major economies play a part in finding the solution. And yes, we cannot ignore the reality that exchange rates are an important factor here.

Second, we need to see action on the International Financial Institutions as well. IMF reform in particular is overdue – we need others to match the flexibility the EU have already shown.

Third, with the support of this Parliament, we are in the midst of a fundamental reform of our own financial system. And once again I want to thank you for the emphasis you have put on the need to achieve this as soon as possible. We need to keep up the momentum at the G20 as well. Progress has been good – but now we have to be sure that it carries through into implementation.

I want the financial sector to play a part in this. That is why the EU should remain committed to push for a financial transaction tax at global level. And in the meantime, the Commission wants to explore other ways of ensuring that the financial sector makes an equitable contribution at EU level, such as a financial activities tax.

Also the next G20 will include for the first time development as an agenda item. A multi-year action plan will be adopted to guide our common efforts in this area. The Commission has been from the beginning a strong supporter of this idea, together with the Korean chair. We need to show that the G20 growth agenda also encompasses and benefits developing countries. At the same time we want to engage emerging economies into an international development framework which is in line with key principles of development policy and allows for greater coordination. Yesterday when I spoke here in Strasbourg with the UN Secretary General Ban Ki-moon he specifically mentioned this point to me and he was very grateful for the support of the EU on this agenda.

Finally, the G20 needs to take a lead in pushing ahead the trade agenda. Far from being an alternative to the WTO, our agreement with Korea should inspire our partners to push ahead to a rapid conclusion of the Doha round negotiations, seizing the moment.

Run-up to Cancun. I want to say a word about this very important conference. We need to stay focused on our goals here: to be ambitious for Europe, and also ambitious for the world. So of course, we need to move the international process forward. This is not easy. We know that in some of our key partners, the pace of change has slowed rather than accelerated.

But let us not forget that in the meantime, we are putting in place the most concrete and effective system for cutting emissions in the world. This is our strongest card, and the closer we get to implement the new Emissions Trading System, the stronger it gets. We have credibility second to none, grounded in a strong consensus between this Parliament, the Member States and the Commission on what we have to do.

So when we get to Cancun, let us not be distracted by arguments about form. We should go into the UN process with plenty of confidence, and determination. Cancun will not be the end of the story, the final breakthrough. But it can be a very important step on the road. The EU needs to convey a clear and consistent message in order to move the negotiation forward. We should aim at a set of concrete action oriented measures which can deliver confidence and trust in the process and bring us closer to our final goal.

That is why I wrote to the members of the European Council last week. I set out what I believe to be a balanced and realistic position, one which continues to drive us forward, without creating unrealistic expectations. This is the time for Europe to take a lead, by setting out how Cancun can make a series of important steps forward, delivering on important commitments like the fast-start finance, and above all by making clear that we are continuing to set an example.

Mr President, Honourable members,

The European Union economy will grow more this year than previously foreseen. But recovery is not yet firmly established, there is no room for complacency, as we have said several times, mainly when we see the still very high levels of unemployment. We all know that we have faced real challenges in the past months, as expressed in a clear way in the Report - that we are going to discuss now – from Ms Beres.

I welcome the ambition and large consensus in this House on these important issues.

But we all know that this is a time when unemployment is hitting hard, when public spending is being squeezed. Our citizens show their concerns, and we must take them into consideration.

But we also know that as the European Union, we have been able to find answers: We have proposed some important pieces of legislation on economic governance, we have come forward with Europe 2020 – which is, I want to remind you, a strategy for growth – because growth, smart, sustainable and inclusive growth, is the answer. And these concerns are also echoed in the excellent report of Mr Feio.

We have proposed a wide range of financial market regulation measures. Let me welcome the agreement of the legislator on our proposals on Financial Supervision.

The reality is that if most people were asked two years ago, is the European Union ready to have a European supervisory mechanism – most would have said "No, it will not be possible". Yet now, we have shown that this was possible.

We are pursuing a holistic approach to cover the different dimensions involved. Let me therefore also underline the agreement reached yesterday by the Council on the Commission's proposal on Hedge Funds: I hope that this position can now lead to conclusive negotiations with the European Parliament, so that the Union can finally benefit from this long awaited regulation. And once again we will be in Seoul, in a position of leadership on that matter.

We are also making progress in other areas. Let me congratulate this House for the work in favour of a new directive on combating late payment in commercial transactions. The directive will give better protection to creditors, in most cases SMEs, while respecting the freedom of contract. Public authorities will have to pay within 30 days, or else pay an interest rate of 8%. You know how much this regulation has been awaited by SMEs, the most important sector of our economy.

Our work is not yet completed. All proposals need to be carried through to their end. But they are starting to show their results. The objective is to get us out of the crisis and through recovery, achieving again the growth rates that create employment and ensure that our Social Market Economy will be fit for the 21st century.

Many thanks for your attention.

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