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SPEECH/ 11/799

Olli Rehn

Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro

The Commission's initiative for growth, governance and stability

ECON Committee - European Parliament

Brussels, 23 November 2011

Dear Sharon, Honourable Members, Dear Friends,

Thank you for the invitation to discuss with you today. The formal reason for this exchange of views is to give you the opportunity to ask me questions about the recent change to my portfolio. And I shall be happy to say a few words about that, and to answer your specific questions on that topic.

I will therefore use this opportunity to talk about the Commission's vision for how we are going to emerge from the financial and economic – and, increasingly – the social crisis, which is ravaging Europe. I also want to talk about the strategy we pursue in order to realise that vision and for getting Europe back on the path to sustainable growth and job creation.

Briefly on my role as the still fresh Vice-President for economic and monetary affairs and the euro. Let me just make a point of clarification – when I speak about the Vice President in third person, it is not because of any megalomania, but because I refer to the Vice President as an institution, not to myself!

When President Barroso announced to you that he would appoint me Vice President, he said that this has a real aspect in terms of an enhancement of powers but that it also had a symbolic aspect.

I can now focus on the increased responsibility that comes with the formal empowerment within the Commission regarding a number of areas; this covers inter alia, formal warnings to Member States under the preventive arm of the SGP; recommendations to the Council regarding sanctions under the 6-pack legislation; as well as the Commission is enhanced surveillance vis-à-vis the euro area countries under an EA financial assistance programme.

This empowerment implies that, in these areas, the Vice President responsible for economic and monetary affairs and the euro can in future—acting in agreement with the President of the Commission—adopt decisions on behalf of the Commission. This gives a significant degree of autonomy to the Vice President, allowing him to ensure a neutral, high-quality economic analysis to underpin the Commission's policy decisions.

The simultaneous transfer of responsibility for Eurostat to Commissioner Algirdas Semeta also means a separation of the responsibility for the production of statistical data from the use of these data for economic analysis under my responsibility.

Honourable Members,

Just a couple of hours ago, the Commission adopted its Growth and Governance package. The package is firmly anchored within the strategic approach of Europe 2020, which was the overall vision also in my confirmation hearing in this Committee just two years ago. I then underlined my commitment to social and competitive market economy, which is able to provide sustainable social welfare. I also set out what I believed people expected of us: prospects for the future –growth and stability; jobs and prosperity.

This vision is no less relevant today. We need to work to enhance growth prospects by pursuing strong structural reforms not least because the scope for macro-economic impulse has been, for the most part, exhausted, as public finances are deeply under stress. For some countries there is simply no alternative to reducing the public debt burden, which is always a burden that is for the next generation to pay off.

Among the reforms that matter most are those that can raise productivity and adjustment capacity. Over the longer term, productivity will depend on a well-educated labour force. The social impact of the crisis is already far-reaching and measurable by the rising unemployment percentages. I am particularly concerned of high youth unemployment, which is a tremendous waste of talent that Europe simply cannot afford.

This is why we encourage the Member States to give priority to concrete actions that target in particular young people who are not in employment, education or training. Attention should also be paid on labour mobility.

In times of crisis, we need a long-term vision at the forefront of our thinking, and we need to pursue that vision with seriousness, with solidity and with steadfastness. For that we need a strategy that is serious, and solid, and steady.

Seriousness, solidity and steadfastness are perhaps undramatic, unmediatic, even unexciting qualities. However they are the qualities we need to face the challenges of this crisis. And I believe that this Commission has demonstrated those qualities over the past two years in the strategy it has chosen to pursue.

Honourable Members,

In addition to reviving growth, our strategy is based on restoring fiscal and financial stability. First on financial stability in the medium-term: With my colleague Michel Barnier on the driver's seat, we have radically overhauled the regulatory and supervisory architecture of Europe's financial sector. This Committee has been very supportive to our work in this field, which has enabled us to make significant reforms that often do not receive the attention they deserve.

There is of course still more to do, but now the financial sector must play its economic – and social – role as a source of financing for the real economy.

Financial stability also includes the firewalls. On the sovereign debt crisis, our strategy has had two legs. First, we have put in place the financial backstops to deal with the risk of default in heavily indebted Member States and to prevent contagion. And second, together with this Committee, we have undertaken a profound reform of economic governance in the EU which will help bring public debt back down to sustainable levels and, just as importantly, prevent any such crisis happening again in the future.

Let me develop on the first point, the backstops. This House has been critical of certain aspects of the financial assistance instruments, the EFSF and, soon, the ESM. On the institutional aspects, it is no secret that the Commission shares your concerns. The intergovernmental method has taken time, and some of our proposals are only now materialising.

What we have done so far is to ensure that the Commission has maintained its role as a key player in the design and implementation of the reform programmes financed through the EFSF and EFSM. And in today's Growth and Governance package, we are submitting to you new legislative proposals for a Regulation to bring the programme surveillance under the Community method where it belongs.

The proposals reflect the fact that effective and efficient surveillance cannot be provided by an intergovernmental approach with unanimity requirements. It therefore recognises that only strong EU-level institutions and the Community method can deliver the public good of sound economic and budgetary surveillance.

On the concerns of this House, as well as the markets, about the efficiency of the EFSF, I believe that October Summits made important progress. And that our top priority must be – as always – rapid fleshing out and faithfully implementing what has already been agreed: on recapitalisation, on leveraging, on private sector involvement and all the rest.

Prevention is the second leg of our strategy, where our first priority is to ensure that what has been agreed will also be implemented. I take this responsibility seriously: I will make full use of all these new instruments from Day One, which is the 13th December. We cannot afford to tolerate a breach of jointly agreed rules by anyone anymore. We have seen, only too concretely, that it happens at the cost of other Member States.

Honourable Members,

Part of the deal of the sixpack was that the Commission produces an analysis on Eurobonds, or stability bonds, which we presented today. While the prospect of introducing stability bonds could help alleviate the sovereign debt crisis, there is no single silver bullet that gets us out of the crisis. Instead, we need to work on all fronts. The decisions of the Eurozone Summit of 26-27 October do precisely that, and are being implemented.

Today's proposals build on the decisions of the Eurozone Summit, and they provide a balanced but determined roadmap for substantially reinforced economic governance, accompanied by options for stability bonds.

In the broader discussion on economic governance, I share President Barroso's view that the Commission has a particular vocation: the vocation of protecting the interests of all Member States; of preserving the acquis, in particular the Single Market; and of making sure that changes in economic governance are done in a transparent way. In a democratic way. In the Community way.

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