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SPEECH/11/691

José Manuel Durão Barroso

President of the European Commission

A Partnership for Progress - A Budget for Growth

High Level Conference on the Multiannual Financial Framework

Brussels, 20th October 2011

Your excellencies,

Ministers,

Members of Parliament – European Parliament, national parliaments,

Distinguished guests,

Ladies and Gentlemen,

First of all, joining President Buzek and Prime Minister Tusk, in welcoming you all to Brussels for this conference on the future Multiannual Financial Framework. I would like to extend my personal thanks to the Polish Presidency and the European Parliament for working with the European Commission to organise this important and timely event.

I would like to thank Prime Minister Tusk and President Buzek for their personal commitment to the success of this conference.

I am particularly pleased to welcome so many key figures from our Member States, from national parliaments, from European institutions and also key stakeholders for this conference. Indeed the issues on the agenda affect us all.

This conference is taking place on the eve of one of the most critical European Councils in the history of the European Union. The European Council that will also be followed by a Euro area Summit. The decisions taken at this weekend's summits, ahead of the G20 summit in Cannes two weeks from now, will be crucial to tackling the systemic crisis that is now unfolding.

It is clear that Europe will not put an end to this systemic crisis without a comprehensive response that boldly addresses all of our most serious problems in a coherent way.

Last week the Commission set out a Roadmap for Stability and Growth. This roadmap will form a basis of discussion for Sunday's summit. I believe we cannot solve this crisis without decisive and immediate action on Greece, on enhancing the euro zone's crisis backstops, on strengthening our banking system, and on building more robust economic governance.

All these elements are important. The political decisions should be taken on Sunday, even if some implementation measures follow. But if there is one aspect without which all the others will lack credibility, this is indeed the need to reinforce the eurozone's firewalls. We have been proposing the leveraging of the EFSF. I hope this will be agreed on Sunday. I am encouraged by the work going on. I think a very positive outcome is possible on Sunday, provided there is political will and a sense of compromise from all participants. Europe needs this effort of compromise. We are in a situation where this compromise can be reached around a more ambitious Europe. I am confident we will do it.

Those elements are important, but I also believe that we cannot solve this crisis without sowing the seeds for sustainable and job-creating growth. And this message should come loud and clear to our citizens. We are talking about fiscal consolidation, yes. It is unavoidable when we have reached such high levels of indebtedness in some of our Member States. We are speaking about the need for structural reforms, yes. It is unavoidable when we see the new terms of competition in the globalised world in the start of the 21st century. But we are also speaking about growth and about investment, and the European Union is part of the solution. A comprehensive solution cannot mean a two-step approach of first crisis-resolution and then wait for growth as a miracle. No – a comprehensive solution must include growth-enhancing measures as a crucial component of crisis resolution. If not for other reasons, for one it is very important, because we have to show to our citizens that there is hope, that there will be light at the end of the tunnel, that there are solutions. That is why I insist growth enhancing measures are part of our comprehensive response to this crisis.

Talking about growth should not be an afterthought. It must be our uppermost thought. That is why, against a backdrop of urgency, this conference is so important. Because the EU budget can make a real contribution to growth and prosperity. It is a budget for investment in the European Union. Investment in infrastructure. Investment in SMEs. Investment in our regions. Investment in training, education, jobs. It is a budget for investment in European citizens.

How can we ask our citizens to accept the hard decisions of fiscal consolidation if we don't also show them that their leaders are prepared to invest in our common future?

Europe needs consensus across all parts of society to make the tough but necessary changes we need. Investing in a better future is one way to get this consensus. That is why we have called our proposals 'A Budget for Europe 2020'.

But Europe 2020 is now. Europe 2020 does not mean we start in 2020. This is the target to reach some of the objectives we have put in our roadmap, namely in our Europe 2020 strategy. Europe 2020 stars already now.

The proposals that the Commission put forward for the budget are ambitious, innovative, forward-looking.

Let me speak about ambition. In times of fiscal pressure, the Commission knows that the case for a European budget must make hard economic sense. That is why our proposal seeks to have the maximum impact with relatively small resources.

Every euro spent must bring added value in terms of jobs and growth.

Pooling resources at European level makes compelling economic sense. It relieves pressure on national budgets and allows us to achieve results for our citizens that would otherwise be out of reach. How? By exploiting economies of scale, and by channelling investment to complete our internal market. This is what we mean by EU value added.

The Commission's proposals are firmly rooted also in this ambitious and innovative logic. The proposal for a Connecting Europe Facility that we adopted just yesterday is indeed an excellent example. Today, missing links in our energy, transport and digital infrastructures prevent the single market from operating to its full potential. We are not making the most of the European scale. We all know this, yet experience has shown that without coordinated action at European level, the necessary investments will not be made. Sometimes it is tempting to make investments that are not a priority in some of our countries, instead of making investments that are transnational and that could bring a much higher benefit for the countries concerned, but also for the European Union as a whole. The Facility that we have proposed is a real opportunity to work together to get these projects funded and to Connect Europe. The investments will generate growth and employment, while at the same time making work and travel easier for citizens and businesses.

Connecting Europe is an example of the new approach we want to see running through the budget for Europe 2020. A budget tied to policy objectives that enhance a culture of responsibility and solidarity geared to performance and results.

That is why we propose to redesign our budget to replace a culture of entitlement with a focus on results. It is vital that each and every euro is used for the right priorities and the right projects.

There will be conditionality attached to our future spending. Let me explain what I mean by conditionality. It means that we are linking all the objectives of the European Union. We are now discussing precisely how to complete our monetary union with an economic union. That means that we have to make progress to a true economic union and the only way to achieve this is to link all the different policies. It will not make sense to be in one area trying to promote macro economic discipline, and in another area trying to promote exactly the opposite. That is why we need this overall coherence of policies. So conditionality is not negative. It is positive, it is in the sense of rewarding those that work for the common objectives, so that we can increase our competitiveness, because if there is a lesson that we can draw from the current crisis is that the gaps of competitiveness between our Member States and our regions in Europe have widened in spite of all the investment made during the last years and that the roots of this crisis in Europe, namely the sovereign debt crisis, there are also imbalances in terms of competitiveness. So we need to have a budget that corresponds to the need to reinforce overall European competitiveness.

Partnership contracts with Member States containing clear conditions and milestones will help to make sure that funding is used properly. But if unsound macro economic policies undermine common European objectives, we must be ready to step in and redirect funds to where they are needed most. This will bring cohesion policy fully into line with our reinforced system of economic governance. The aim is to act before it is too late. The aim is to get full potential from every euro spent. The aim is to lead to a win-win solution for all our Member States, all our regions and all our citizens.

Ladies and gentlemen,

The Europe 2020 budget is also forward-looking and it is efficient.

I say forward-looking because it illustrates very clearly our determination to modernise our policies and to use every euro to reach several objectives. We have to do that because in the current situation if we do not show that this is an efficient way of using money we will not have the necessary backing of all our Member States to go on with this ambitious proposal.

The Commission's recent proposals on agriculture, cohesion and infrastructure are already a reflection of this. For instance, our proposals on the future Common Agricultural Policy focus support very clearly on environmental and job-creating objectives, in addition to guaranteeing food production and also to preserve our Common Agriculture Policy.

The budget also reflects the Commission's firm belief in using the EU budget to leverage investment from other sources. The Communication we adopted yesterday sets out how innovative financial instruments can be used to support key strategic investments. We expect these instruments - in particular project bonds – to play an important role in infrastructure investment through the Connecting Europe Facility. Once again the idea is very simple: the idea is to mobilise public and private funding through systems of leveraging working namely with the European Investment Bank because we need also some public investment for the future of Europe.

And now I also mention the efficiency of the budget because we are making a major effort to simplify our programmes. Wherever I go in Europe people say that the Regulations are too complicated for companies, for farmers, for researchers. That is the complaint I receive everywhere I go in Europe. Including very, very advanced scientists, people who have high intellect, they sometimes tell me that they have difficulties in understanding our forms to ask for some kind of grant. So this is the time to make the simplification effort. The burden and cost of controls has also become too high. I would ask for the strong support of Council and Parliament to maintain the simplification aspects of our proposals as they go through the co-decision process. My experience shows that when we talk about this everybody agrees in principle but afterwards when it comes to the concrete drafting of the legislation all the difficulties, all the administrative barriers come. So let's try this time to make it a success.

Ladies and Gentlemen,

Our proposal for a budget is ambitious, forward-looking and efficient. But above all, it is European. I want to underline this – that it is European, it is not the sum of different envelopes only. It is a European budget with a European logic, with a European project, with European ideas. It is an investment programme to make Europe more efficient, better connected, more competitive and more prosperous. I hope also more just.

That is why we have also made important proposals on the future financing of the EU budget. This is a crucial issue and there will be an opportunity to discuss it in more detail later today. National parliaments will have to ratify decisions in this area and so it is very important that all of you play a full role in the debate.

Let's be clear. For a European Union-wide budget to reach its European-Union wide objectives, it must move away from the current model of primarily GNI-based contributions, which inevitably leads to national entitlement debates. Focusing on how much each Member State pays into the EU budget detracts from the added value that it represents and what it is for.

I am convinced that it is time to return to the very clear principle laid down in the Treaty, the initial Treaty, the Rome Treaty: the EU should be funded wholly from own resources. I know this is very controversial but the Commission has not hesitated to come forward with this proposal.

This, I want to insist, is not a debate about the size of the budget. It is about promoting transparency and fairness, and linking the way the EU budget is funded to our common policy objectives. That is why we have proposed two new own resources to reduce the emphasis on national contributions and to put the EU budget back on a sure footing.

In my State of the Union address to the Parliament in September I announced the Commission's proposal on the Financial Transaction Tax. The FTT aims to ensure that the financial sector makes a contribution to the costs of repairing our financial system. Taxpayers have supported the financial sector to the tune of €4.6 billion over the last three years. By using the FTT to reduce GNI contributions, the financial sector could both reduce the burden on national treasuries and stimulate growth and prosperity in the real economy. I think this is a matter of fairness and responsibility.

We have also proposed a major simplification to the system of rebates and corrections. The current system is complex, opaque and undermines the integrity of the EU budget. We need to start afresh with a clearer, more transparent system.

In the longer term, I would like to see an end to special arrangements. However, I do recognise that in the current circumstances some Member States may still face a budgetary burden which is excessive in relation to their relative prosperity. We have therefore proposed a much simpler system of lump-sum reductions in the annual contributions of these Member States.

I know that the funding of the EU budget is a complex and sensitive topic. But the system we have is simply not sustainable. The time has come for a broad debate on how to better align the current system with the principles laid down in the Treaty and with the ambitions and policy objectives of the budget itself, I would say the Europe itself. I am glad this topic features prominently on today's agenda of your conference.

I would like to conclude, ladies and gentlemen, by underlining the importance of this conference. I know that these matters are extremely sensitive, politically but sometimes also complex from the technical point of view. In the Commission this was probably the file that took more time and energy to prepare. Commissioner Lewandowski and his services, myself and all the other colleagues, we used many, many, many months of preparation. I would also like say in very close contact with the European Parliament, I want to thank I see here many leaders of the European Parliament that have made a great contribution and also conception of this budget. We know it is difficult but I believe it is possible to achieve broader consensus on the budget. This is not about pitching payers against contributors, institutions against each other, or one group of beneficiaries against another. We are here because we are committed to taking Europe forward and getting Europe in shape for 2020.

The Commission's proposals were received as a very sound basis for our discussions. I am very happy with this. They were welcomed in general terms by the European Parliament. Also in the Council they were considered as serious proposals. I was not expecting unanimity immediately I have to say. So the important part was to get the shaping of the debate right. And all of the sectoral proposals will be on the table by the end of this year, we are working very fast now on the concrete proposals, you know. It is now crucial that we all work together in an open and constructive spirit as the decisions we will take about the size of the EU budget and the way it is allocated, will shape our Union for many years to come.

We know that tough negotiations lie ahead. But against a background of urgency, in which our international partners and the markets are expecting more from Europe, let us show that we do have the political will to bring results. Results that can help to get us out of this crisis and spur growth.

So as you go back to your respective Member States and institutions today or tomorrow, let me ask you one thing – to make the case for Europe. To resist some of the tendencies that sometimes we see here and there trying to manipulate data, trying to manipulate some facts, trying in fact sometimes to give in to populism if not sometimes to very narrow nationalism. Don't be misled by the myth that this is money for Brussels. It is not. It is money for our young people who cannot find work. Money for our researchers and innovators to bring their ideas to market. Money for our SMEs and entrepreneurs to do business across our continent more easily. Money for our regions so that they can promote green growth, sustainable growth.

Let us now show our international partners that we are ready to make investment that will make Europe stronger and more competitive in the world. Let us show that Europe is ready to make what I call, and I think the words are these ones exactly, a partnership, a partnership for progress.


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