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José Manuel Durão Barroso
President of the European Commission
Presentation of the 2012 Annual Growth Survey and economic governance proposals
Brussels, 23 November 2011
Good afternoon ladies and gentlemen,
The package the Commission has adopted just today is about stability and further strengthening economic governance. It is about the short and the long term prospects for our Union and the euro, our currency.
We believe that we will only succeed in re-establishing confidence if we recognise that the current crisis demands not only emergency measures but also lasting solutions to the structural challenges that this crisis has been exposing.
Let me start with our 2012 Growth Survey. Let me say this very bluntly: the economic picture is much bleaker than in January when the first Annual Growth Survey was presented. We face more uncertainty, greater risks. Confidence is significantly lower. The recovery has stalled.
If many of the messages contained in the first AGS, the AGS for 2011 are still valid today, it is because not enough has been done to implement the recommendations made at that time.
We need to do more. We need to deliver collectively on our commitments.
Today's Annual Growth Survey launches the 2012 European Semester of economic governance. We are calling on the EU, in particular the Member States, to embrace in a credible and wholehearted way, the five key priorities. And we expect them to take these into account when they make their next National Reform Programmes (regarding economic reforms) and Stability or Convergence Programmes (regarding public finances), which as you know they will present in April/May. The priorities are the following:
1. To continue with fiscal consolidation, maintaining investment in areas essential for future competitiveness, and reforming tax systems to make them more conducive to growth and employment.
2. To restore normal lending to the economy, which means pursuing the repair and reform of the banking sector, facilitating investment in SMEs and encouraging venture capital.
3. To step up structural reforms, particularly in the area of services, network industries, the public sector and the digital economy. On services, for example, we all agreed in the 2011 AGS to fully implement the Services Directive, yet today, three Member States have still to do so.
4. To fight unemployment and address the social impact of the crisis by removing rigidities in the labour market and characteristics in welfare systems which have the perverse effect of perpetuating unemployment and reinforcing poverty.
5. To modernise public administrations at all levels so that they facilitate rather than hinder investment and job creation throughout our Union.
I will not claim that all of this is new – unfortunately it is not! Because what we need most of all is not an array of new ideas, but a serious, urgent, consistent drive to implement commitments already made.
The second element of today's package is made up of two proposed Regulations aimed at further improving the economic governance of the euro area. Based on article 136 of the Treaty, we submit them for adoption by co-decision by the Council and by the Parliament.
We have already taken big steps forward this year in this matter. With the European Semester, we have put in place a process for unprecedented cooperation and coordination of economic and budgetary policies. With the Six Pack, which will enter into force in less than a month, we have given ourselves the tools to monitor more closely and enforce more effectively the soundness of Member States economic and budgetary policies.
Today, we build on those advances by calling for still closer cooperation in the euro area. Specifically, we are proposing:
I have said on several occasions that there was much more we could do under the existing Treaties, and these proposals are the proof of that.
Under the new rules, the Commission will have greater surveillance powers so that we do not face again the situation where failings in one country endanger the stability of the euro area as a whole.
National budgets will of course be prepared by Governments and voted on by national Parliaments. Parliaments will of course have the final say. The difference with the current system is that the Commission will have the right to issue an opinion and may request changes. National Parliaments will for the first time have the full information on all other countries in the euro area. We must not oppose the national democratic process to the European democratic process. We need both. Democracy is not only possible within the limits of a nation state in the 21st century and in this globalised world. Indeed, if we want to preserve democracy also for the global order, we need to complement the democracy of the nation state with the democracy of the European Union. Otherwise, we will hand over material sovereignty, the real sovereignty, to markets and financial speculators, who are not subject to any kind of democratic scrutiny. That is why we need a strong European democracy as well as strong national democracies.
The adoption of these measures means stronger budgetary discipline in the euro area. But greater budgetary discipline – and responsibility – should also open the way to greater financial stability. And that is why we are also presenting today a green paper on Stability Bonds. We said we will do it, and we are respecting our commitments.
Implemented in the right way, the joint issuance of debt in the euro area could bring tremendous benefits. It could lead to greater financial integration and to the creation of a much larger and more liquid bond market – comparable to that which exists for U nited States Treasuries. As you know, these are seen – even with debt in the United States approaching 100% of GDP – as some of the safest investments in the world.
The green paper sets out three options for Stability Bonds. In each case, we analyse the potential benefits and the risks for financial markets and financial stability, as well as the implications for possible Treaty changes.
This is the Commission's first formal contribution to this very important debate. I believe that this Green Paper will help to structure and inform the consultation that will soon be launched and the discussions that must be held.
I would like to make an appeal for these discussions to be approached by all parties with an open mind and for them to be free of dogma.
Let me repeat what I have said a number of times: Stability Bonds will not solve our immediate problems and cannot replace the reforms that are needed in countries currently under pressure. But it is also important to show to public opinion and the international investors that we are serious about stronger governance in the euro area, both in discipline and in convergence. And Stability Bonds are exactly an example of that -an example of reinforced governance, of a strong will to live together in the euro area, and a good example of discipline and convergence.
I will now hand over to Olli Rehn who will go deeper into some of the key elements of today's package.