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Olli Rehn

European Commissioner for Economic and Monetary Affairs

EU leaders must now finalize the response to the debt crisis

Brussels, 23 March 2011

President, Honourable Members,

Thank you for the contributions and views expressed. They reflect the weight of the stakes of tomorrow's European Council.

I trust the messages sent will be heard in all corners of Europe. It is fair to say that the European Union will have profoundly evolved after this March. The financial crisis, which turned into an economic recession and then to a sovereign debt and banking crisis, has forced Europe to seek new ways forward, to consider all possible options, and to take decisions with long lasting consequences.

As President Barroso said in his opening remarks, we will respond to the challenge with a comprehensive strategy that builds on the strengths, values and institutions of the European Union. It is exactly the kind of challenges like we are facing us today that the European Union was founded for – to be able to withstand storms together, and to be able, by joint efforts, to come out of crisis stronger than before.

As a result of months-long tough talks, the elements of a comprehensive economic-policy response are now finally there for the leaders to agree and commit to in the European Council tomorrow. Determination to safeguard financial stability and a strong European commitment has prevailed: we will soon have what it takes to strengthen the foundations of the Economic and Monetary Union and to reinforce confidence into the European economy.

First, the member states and the euro area member states in particular are all pursuing intensified fiscal consolidation and growth-enhancing structural reforms with very strong determination. This is particularly crucial in countries under the markets' spotlight, where the full implementation of the announced measures of consolidation is now of paramount importance to restore confidence.

Second, both the Council and the Parliament are delivering on your commitment to conclude the Commission's legislative package on economic governance by this summer. Reinforced economic governance is the cornerstone of our comprehensive response.

Third, the permanent European Stability Mechanism will be made functional as of June 2013, with the effective lending capacity of 500 be. By this decision, we will have in place a financial backstop with a sufficient containment effect to clear away even the slightest doubt about our capacity to act even in the most stressed scenarios.

As explained by President Barroso, the role of the Commission in the running of operations of the ESM will be central, and the link of the ESM with the EU institutions, of course including the European Parliament, will be clearly established.

We will in due course propose a regulation based on Article 136 of the Treaty, clarifying the steps to define policy conditionality and to ensure consistency with the EU framework of country surveillance.

Fourth, last but not least, the banking sector repair must be completed, to safeguard the provision of credit to the real economy, to enterprises and to households. The next round of bank stress tests will be conducted in the coming months. The results will guide the necessary restructuring and possible recapitalisation of the EU banking sector. Before the publication of the results, the Member States will need to decide and present their strategies for the possible restructuring and recapitalisation of their vulnerable institutions. Such plans should be ready as soon as possible.

Ladies and Gentlemen,

Once the European Council will confirm its full commitment to all these elements of the strategy, the EU will be well on track to turn the economic tide in 2011. This does not mean that all is fine, even less that we can lean back – but it does mean that we are prepared to face current challenges, and to prevent them in the future.

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