Vice-President of the European Commission, EU Justice Commissioner
With confidence towards stability and growth
15th Summit of Chairmen of the European Popular Party Parliamentary Groups in national Parliaments of the European Union
Brussels, 5 December 2011
Ladies and Gentlemen,
It is a great honour and privilege to address you today. As both a former European and national Parliamentarian it gives me particular pleasure to address this audience bringing together all the "chambers" of the directly-elected representatives of the European peoples.
As we mark the second anniversary of the entry into force of the Treaty of Lisbon and its innovative Protocol No. 1 on the role of national Parliaments, the subject of today's meeting confirms that national Parliaments are at the heart of European politics and that Europe is at the top of national political and economic agendas. This is a very healthy development as national Parliamentarians, as direct representatives of the citizens, play a central role in shaping up the European Union. This makes it more important than ever that we exploit the full potential of our political dialogue and cooperation. And more than ever we need to pool all our strengths and abilities to tackle the current crisis.
These are testing times for Europe. There are moments in time when history accelerates, when we have to embrace change and take critical decisions that will reshape our landscape. We are at such a moment. And this is a moment where we have to drive events and not be driven by events.
Last September President Barroso called for a "European renewal" in his State of the Union speech. I am confident that the European renewal will be forged out of the current crisis.
Overcoming this crisis is our first priority. This is essential for our economies, for our citizens, for our social market economic model and also for the place of a strong and united Europe in the world. There is much for Europe to be proud of, but we must have the courage to act to renew our Union. As for the facts, they are clear: we have history. We have well established and solid institutions. We have a strong Treaty, laws, rules and a functioning system of enforcement. Our collective economic force represents one-fifth of the global GDP. And we are working together through an open political process. In short: the European Union is a force to reckon with.
We must therefore build a strong and sustainable recovery on these sound foundations. We need to complete monetary union with a true economic union. The increasingly systemic nature of the crisis has also made it clear that we must pursue a greater integration of economic governance, especially within the Euro area. This is not something new. This opportunity is a recipe that was first launched by the former Luxembourg Prime Minister Pierre Werner back in 1970, also known as the "architect of the euro". In his report, Pierre Werner set out a roadmap for achieving European Monetary Union, calling for agreed frameworks for national budgetary policies, a European Central Bank and for the coordination of macro-economic policy by an 'economic policy decision-making centre' responsible to the European Parliament – the European Commission. We are now completing what the Werner report had called for 40 years ago.
This will be high on the agenda of this week's European Council.
It is clear that our room for manoeuvre is now more constrained than two years ago. To respond to the current situation, the European Commission is using the current Treaty scope to the maximum and proposing forceful measures to complete the Economic and Monetary Union. Economic governance has been strengthened and mechanisms to address the financial crisis have been put in place.
This is why, two weeks ago, the Commission adopted the Growth and Governance Package. This consists of three parts:
The Annual Growth Survey which spells out the policy priorities in the coming 12 months to restore macro-financial stability and boost sustainable growth.
Two proposals for regulations to further strengthen economic and budgetary surveillance in the euro area.
The feasibility study on stability bonds examining the potential benefits for financial stability of jointly issues bonds and the preconditions for their possible introduction.
The Annual Growth Survey launches the next European Semester of economic governance by setting out the Commission's views on the challenges and priorities for the next year. The Annual Growth Survey for 2012 sets out the following five priorities:
First, pursue fiscal consolidation whilst paying attention to the impact of consolidation on growth.
Second, restore normal lending to the economy. The banking sector needs to be strengthened via appropriate regulation and recapitalisation.
Third, structural policies are key to reviving growth at the current juncture. Structural reforms have to be stepped up, in particular in services, network industries, the public sector and the digital economy.
Fourth, tackle unemployment. Reforms are necessary to make labour markets conducive to job creation.
The fifth and final priority is to modernise public administration. This is essential to implement the necessary reform measures.
Some of these priorities are not new. This is not by accident: we have all already made many commitments; now we have to focus on their implementation.
This Annual Growth Survey 2012 kicks off the second European Semester. The Council is invited to discuss the Annual Growth Survey and establish the priorities and actions for the next year.
I want to underline once more the following: without swift and determined implementation, these priorities will not help achieve growth.
As part of the Growth and Governance package, we proposed two regulations based on Article 136 of the Treaty for the euro area countries. The proposals are a major step forward in euro area integration. They build on the 'six pack', complete the European Semester and establish a link between intergovernmental financial assistance and Treaty-based surveillance.
The first regulation proposes to introduce binding rules for balanced budgets into the national legislation, preferably at constitutional level – the golden rule or debt brake, in which, over the economic cycle, the Government will borrow only to invest and not to fund current spending. In simple terms this means applying the Luxembourgish housewife cardinal principle: you only borrow to pay for investments that which will benefit future generations and not borrow to have a party or go on holiday. The regulation also requires independent forecasts to be used as the basis of budgetary plans and draft budgets. But most importantly, it proposes tight monitoring of national budgets. We propose harmonised budgetary timelines with draft budget laws to be submitted to the European Commission by 15 October each year.
The European Commission will then assess draft budgets against Country Specific Recommendations under the European Semester, and against possible Excessive Deficit Procedure recommendations. Should the draft clearly not be in line with the recommendations, the European Commission can ask for a new draft. Otherwise, the European Commission issues an opinion. The European Commission would present such opinion in the national Parliament, if requested. When a Member State is in Excessive Debt Procedure, the European Commission can issue recommendations for additional measures. Again, the members of the European Commission are ready to discuss with national Parliaments why the budgets have to be designed within certain margins.
The other regulation specifies the modalities for enhanced monitoring of euro area Member States receiving financial assistance or suffering from serious risks to its financial stability and to the euro area as a whole. It codifies the current practice of negotiating and continuous surveillance for countries receiving financial assistance. In addition, it allows enhanced surveillance of a country that is considered to be a risk to financial stability, even without a programme. Enhanced surveillance would be continued until 75% of loans received as financial assistance under a programme are paid back. Finally, it suggests that the European Commission will have the right to propose to the Council that it recommend a Member State seek financial assistance if the Member State concerned is posing a risk to financial stability, based on the Commission's analysis in liaison with the European Central Bank.
This is not the distant future. This is now. These are instruments that are currently on the table and we do not need to change our Treaties to act. In this context, we expect the Parliament and the Council to act on them swiftly and with determination.
Ladies and Gentlemen,
Clearly, the European Commission is saying that stronger fiscal responsibility and budgetary surveillance is needed. It is a matter of collective necessity. What happens in one Member State has an impact on its neighbours and other members of both the euro area and of the European Union. Member States are not islands. But this needs to be complemented by action aimed at increasing liquidity in the European debt-market.
We all know that the fragmented European sovereign bond market is under great stress. Investors require substantial risk premia on the sovereign bonds of some euro area Member States. This situation has revived interest in jointly issued euro area bonds to create a large, liquid bond market.
This is the rationale behind the Commission's presentation, just two weeks ago, of a Green Paper with options on stability bonds. The key issue is that jointly issued stability bonds would produce substantial benefits in terms of reducing and stabilising borrowing costs for Member States and in terms of guaranteeing a better shock resilience of the financial sector and improved market efficiency over time. But as common bonds could reduce market discipline, their introduction can only be meaningful on the condition that euro area economic governance is substantially strengthened.
The "six pack" constitutes the foundations for reinforced economic governance, and the recent proposals are a further step in this direction. But we would have to go far beyond these reforms to facilitate a safe introduction of stability bonds, which would most probably require amendments to the Treaty.
Let me say a few words on Treaty change. Let us be clear: a Treaty change cannot offer an immediate solution to the current crisis. But it is true that by working to embed stricter discipline and stronger governance into the Euro area in particular, we may help to prevent a future crisis by creating a real stability union.
The President of the European Council, together with the President of the European Commission and the President of the Eurogroup, was asked to identify steps on further strengthening economic convergence within the euro area, including exploring the possibility of limited Treaty changes. These deliberations on improving euro area economic governance are on-going and an interim report will be presented to the European Council.
The view of the European Commission is that any Treaty change should be based on the principle of one Union, based on the current institutional framework, and firmly anchored in the community method. European integration can only be achieved by a single legal framework of one Union. That is the best way of building a stability union, of building an effective economic union.
Equally important, only the Community method can guarantee coherence between European economic and monetary policy and all other EU policies as well as the completion of the Single Market or the European judicial area. That is the guarantee of the fair and just treatment of the Member States and the European citizens. I trust that both the European Parliament and national Parliaments will stick to this and be ready to justify the benefits of the Community method vigorously in any future negotiations on a new Treaty. The community method is the best way to deliver a stronger Union and protect the interests of European citizens.
In the possible case of a revision of the Treaties a balance will have to be maintained. There will be diverging views – some will want to put more weight on stability, others might wish more emphasis on stimulating growth. Some will call for more solidarity, others will want more discipline. It will be important to incorporate all these elements in our future work so that the end result is a balanced set of rules ensuring both stability and solidarity. These are not mutually exclusive factors. In fact they are complementary.
We have arrived at a point in time where serious choices and commitments have to be made. Economic and Monetary Union will either have to be completed through much deeper integration or we might have to accept a gradual disintegration of over half a century of European integration.
This is a choice that needs to be taken consciously by the Governments of the European Union Member States, and by all European citizens and their representatives in the national Parliaments and in the European Parliament.
Our choice is clear – it is a choice for an ever closer union, for the sake of sustainable growth and job creation in Europe, and thus for the sake of legitimacy and, not least, for the sake of the future of European unification. I trust such will also be the choice of the European Parliament and of the national Parliaments, and that of the citizens that all those chambers represent – the European citizens.
We are not facing a Treaty crisis or a euro crisis. We are facing a debt crisis but also a crisis of confidence by citizens in political establishments. To re-establish this confidence, we must act. Not only by bringing emergency measures but also by bringing lasting solutions to the structural challenges that the crisis has exposed. That is why we have to finally put in place a sound system of governance, something which has been lacking since the creation of the euro. But euro governance cannot become a matter for only a selected group - it has to be based on the Community method and include the entire euro zone or "euro zone plus".
Some countries in Europe are undoubtedly a strong engine of the European Union. But a strong engine alone is no guarantee that an airplane will fly. You will always need a pilot flying the airplane and that pilot is the European Commission, defending the interests of all Member States, old, new, big or small. That pilot is the European Commission, your economic government of the European Union, pursuing the European interest.
The answer is therefore that we need more Europe. Yes, we need more Europe. Recently Chairman Joseph Daul, in his speech to the European Parliament on the economic governance on 16 November: "La solution à nos problèmes, ce n'est pas moins, mais plus d'Europe. La solution, c'est l'Europe".
These words are in direct support and a strong encouragement of our work in the European Commission. I hope they also guide all of you in your home countries when you are interviewed in the media; when you are involved in parliamentary debates; when you are asked for your views on the way to growth and recovery.
Citizens are waiting for clear, strong, constructive and most of all confident views. And I hope they hear this message: "The solution comes from Europe". "The solution is more Europe".