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José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso at the pre-European Council debate in the European Parliament

European Parliament

Brussels, 23 March 2011

Mr President,

Minister Győri,

Honourable Members

As I said last week to this Parliament what Europe will put in place at this European Council on 24-25 March will be a real game-changer in terms of economic governance.

In other words, it will be a cornerstone in our comprehensive response to the crisis. And it will mark the beginning of its full implementation with the setting up of a new economic governance framework and hopefully a European monetary union (EMU) walking on its two legs – the monetary union, but also the economic union - instead of limping along.

The economic policy of each Member State is now recognised as a matter that should concern all Member States and all the European institutions. For the first time, with the European Semester, we have the tools we need for early and strong coordination of our economic policies and structural reforms, before each Member State sets its own policies and budget for the next year. Not only we have coordination ex ante, but we can do that in parallel with the economic policy and budgetary policy at the same time.

The first European Semester was kicked off earlier in January by the Commission's Annual Growth Survey, which presents 10 priorities for this year, all firmly anchored in the "Europe 2020" strategy for growth and jobs.

They are intended to promote fiscal consolidation, correct macro-economic imbalances, and ensure financial stability – all prerequisites for sound growth. In itself those policies will not of course deliver growth, but it is quite clear that without those prerequisites, we will not have the kind of growth we need – sustainable, inclusive growth.

The Pact for the Euro, agreed by Head of States and Government of the Euro area and open to all Member States wishing to join, reflects the priority actions of our Annual Growth Survey, but now the Pact for the euro, as it was agreed is also fully compatible with the Treaty and is fully integrated in the European system of economic governance. Once again, I want to thank this Parliament, because I believe the strong positions taken by this Parliament were very important to assure that the community approach will be recognised also in the Pact for the euro. The Pact for the euro also recognizes the Commission's work on taxation and financial regulation. In fact, the Commission is working on a proposal to tax the financial sector.

Also, every Member State, when implementing the Stability and Growth Pact (SGP), must follow the recommendations of the Commission. As decided last week, I quote: "In deciding on the steps in the SGP the Council is expected to, as a rule, follow the recommendations of the Commission or explain its position in writing." This is the principle of 11 March and I think it is a very important political principle that can be added to the important legislative decisions that have been taken and also some that you are now preparing.

Ladies and Gentlemen,

Distinguished Members of this Parliament,

Fiscal consolidation is not an end in itself. Without fiscal consolidation, there is no confidence, without confidence there are no investments, without investments there is no growth. But our target, as I have said it in this Parliament several times before, is growth – sustainable, inclusive growth.

For that we also need to improve the business environment. We need to complete the internal market and one of the goals we have in the internal market is precisely the different basis in terms of taxation. That is why the Commission has proposed a legislative proposal for a Common Corporate Consolidated Tax Base (CCCTB).

We need indeed to tap the full potential of the Single Market. And the Commission will soon put forward the Single Market Act, with a set of a dozen priority proposals to put our biggest asset to work to deliver growth and jobs and reinforce Europe's competitiveness.

We also have to do more to foster employment. We need more labour mobility not less mobility; we need more promotion of tax incentives to work and we want a growth that is employment enhancing and employment friendly.

In close cooperation with the Commission, Member States are now finalising their National Reform Programmes as well as their Stability or Convergence Programmes. Let me stress that having clear, concrete, ambitious and nationally owned programmes is essential to the successful implementation of the European Semester. So it is now up to each Member State to have this serious work completed by the end of April.

Last week the Council agreed on its general approach to the Commission's legislative package on the reinforced economic governance. And I would like to thank the Hungarian Presidency for all its efforts which led to a successful compromise.

Now the negotiations will start with the European Parliament. I know that the Commission can count on a strong support from this House. And I hope we will have a final agreement by June. Then our new economic framework will be fully in place and all its tools could be used to assess national budgets, Stability and Convergence Programmes as well as National Reform Programmes by 2012.

Finally with the current European Financial Stability Fund and by 2013 the permanent European Stability Mechanism, we will have a backstop tool to guarantee the stability of the Euro area as a whole, if needed. Last Monday the Finance Ministers agreed to set–up the European Stability Mechanism from June 2013, with the effective lending capacity of 500 billion euros. This is a major step forward for the European Union, which the Commission has been strongly promoting. Also, following our proposals, the agreement for the future ESM clearly states the central role of the Commission in the process, as well as the implication of the European Parliament.

It will be for the Commission to assess, in liaison with the ECB, the existence of a risk to the financial stability of the euro area as a whole, and to undertake analysis of the sustainability of the public debt of the Member State concerned. Further it will be for the European Commission to take the lead in assessing the actual financing needs of the beneficiary Member State, as well as the nature of the required private sector involvement. It will be for the Commission to propose to the Council a decision endorsing the macro-economic adjustment programme.

The European Commission, together with the IMF and in liaison with the ECB, will be responsible for monitoring compliance with the policy conditionality required by a macroeconomic adjustment programme.

The policy conditionality established under an enhanced surveillance or a macroeconomic adjustment programme will be consistent with the EU surveillance framework and must guarantee the respect of European Union procedures, and thereby also the role of the European Parliament.

To this end, the Commission intends to propose a Regulation of the European Parliament and of the Council based on Article 136 of the Treaty, clarifying the necessary procedural steps in order to enshrine the policy conditionality in Council decisions and ensure consistency with the EU multilateral surveillance framework. The Council and the Commission will inform the European Parliament on a regular basis about the establishment and the operations of the ESM.

So, Honourable Members, I just want to confirm what was said in the letter by Commissioner Rehn and the President of the Eurogroup Jean-Claude Junker to you, Mr President Buzek. So I think we have an agreement that it fully compatible with the community approach and I want once again to thank the Parliament for its commitment to that approach.

On the financial stabilisation front Member States have also eventually acknowledged the degree of interdependence of their economies. The European Union has already done a lot for repairing the banking system. But here also we need to do more. A healthy banking system is a prerequisite for a sustainable economic recovery.

A next round of EU-wide bank stress tests will be conducted in the next months by the newly established European Bank Authority (EBA). Transparency is essential so that policymakers and investors can make informed judgements and so is the willingness to follow through with tough, indispensable decisions.

Honourable Members,

I think after the very comprehensive and good of Ms Győri, representing the Hungarian Presidency, I will not now elaborate on the issues regarding Libya and the Southern Mediterranean.

But let me tell you just in terms of the European Commission's competence that we have been playing a substantial role in coordinating the European response to the escalating humanitarian crisis on the Libyan borders. We have mobilised 30 million euros to provide assistance to refugees and migrants. And as you know we have several teams on the ground and we maintain close contacts with countries of origin and donors. The Commission's Civil Protection mechanism (MIC) is also continuing to support Member States consular operations and very closely with the Hungarian Presidency, Commissioner Malmström, Commissioner Georgieva, have also been very active in this matter.

The No Fly Zone military actions, implemented pursuant UN security Council Resolution 1973, brought new circumstances that need to be factored in when delivering humanitarian assistance in a secured and efficient way to those in need, either at the borders or inside Libya. It brought new hope as well to spare civilian innocent lives.

While dealing with the short-term challenges of this fast-changing situation and extremely complex situation, we are not loosing sight of our long-term goal of a democratic, stable and prosperous Southern Mediterranean region based on the Commission proposal on "Partnership for Democracy and Shared Prosperity."

The Commission's Civil Protection mechanism is also coordinating the EU's response to Japan's request for assistance. And since last Friday we have reinforced our presence on the ground with a civil protection team composed of logistics and nuclear experts.

Specifically on nuclear issues, it is important to draw the lessons from the events in Japan. That is why the European Commission proposed to review the safety of nuclear sites and the comprehensive risk and safety assessment - stress tests on all European nuclear sites. These stress tests should also be carried out in all our neighbours and beyond under the responsibility of the IAEA. I hope the European Council will confirm and endorse this orientation.

Honourable Members,

As you see, we have a very full agenda for the next European Council and the Commission has been working hard to develop this comprehensive European response to the crisis outside our borders, but also regarding the economic situation.

Together with the European Parliament, we will play a central role in the implementation of the comprehensive response to the economic crisis. We will do this always in the spirit of the Lisbon Treaty that is in close coordination with this your Parliament. And you can be sure that we will always live up to this responsibility as well.

Thank you for your attention.

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