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José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso at the EP debate on the conclusions of the December European Council

European Parliament plenary session

Strasbourg, 13 December 2011

Dear President Buzek,

Dear President van Rompuy,

Honourable Members,

The Commission's fundamental point of departure for last week's European Council was crystal clear: The European Union needed to give a comprehensive response to the current crisis, making a firm commitment to the Euro and to the irreversibility of our currency.

It is indispensable to have more discipline, structural reforms for more investment, more convergence, and credible mechanisms of solidarity. All these elements belong together.

Over the past 18 months we have achieved some progress within the European Union as a whole, at 27, on the basis of the existing Treaties, with the Union institutions taking the decisions.

As a result, we now have a European strategy for growth - Europe 2020. We have a substantially reinforced Stability and Growth Pact with the so-called Six-Pack, which will come into force today and will apply to all 27 Member States.

We have the European Semester through which we coordinate our fiscal and macro-economic policies and implement our agenda for growth on an annual basis. We have the new macro-economic imbalances procedure. There is also the Euro Plus Pact.

There are two brand-new Commission proposals made on 23rd November under article 136, on further strengthening fiscal discipline which I hope will be adopted in a fast-track procedure through an early first reading agreement.

We have also our assistance and adjustment programmes for 3 euro area member states. There is the European Central Bank playing its role, there is the European Financial Stability Facility, there will be the European Stability Mechanism.

The main purpose of this European Council was to show joint determination to tackle persisting market tensions by consolidating these achievements and reinforcing them even further. And indeed, during Thursday night an agreement was reached to create a genuine "fiscal stability union", a new "fiscal compact".

On substance, this agreement was ambitious, and it was unanimous. Unfortunately we were not unanimous on the form, with one Member State unable to join. I will come back to both aspects – substance and form in a moment.

Let me first highlight a number of important conclusions of the Summit which match the position that the Commission has made for some time.

I welcome, first of all, that member states have agreed to advance the entry into force to July 2012 of the permanent European Stability Mechanism. As you know, already in September I had suggested precisely this during the State of the Union debate in front of this House. I also welcome that member states now finally agreed to deal properly with the involvement of the private sector with the ESM applying the same principles as the IMF. The Commission has always warned of the possible negative effects of PSI for market confidence. The decision now taken should reassure investors.

An agreement also emerged that the ESM should not, as was initially foreseen, be subject to the rule of unanimity. Decisions will now be taken by reinforced qualified majority. Here again, I had proposed this already for the EFSF, but without success. So I'm happy to see that now, for the ESM, things now go in the right direction.

More immediately, the leveraging of the EFSF will be deployed very rapidly, with the ECB acting as its agent in the EFSF operations. I hope that member states will confirm their commitment to provide the IMF with additional resources of up to 200 Billion Euros within the coming days.

We now need to go further. The Spring European Council in March will discuss how to further deepen fiscal integration of the Euro area on the basis of a report by the President of the European Council, together with the President of the Commission and the President of the Eurogroup.

The Commission's Green Paper on European Stability Bonds of 23 November will feed into this debate. As you know, this is very controversial for some governments. Nevertheless, I was encouraged to see support to our assessment that stability bonds can give an important contribution in the future to completing a fiscal stability union and creating a stronger liquid bonds market in Europe.

We also need to go further on growth, on investment, on measures to promote jobs. Fiscal discipline is of course key; but let me be frank on this - we cannot build our economic union just on discipline and on sanctions: we also need a Europe of growth and of jobs. A Europe of responsibility certainly, but also a Europe of solidarity.

Honourable members,

Let me now move on to the key elements of the new fiscal compact.

First of all, it includes a commitment to ensure that, as a general rule, national budgets shall at least be balanced, and that such balance is defined as the annual structural deficit not exceeding 0,5% GDP. To give this national debt brake or "golden rule" maximum legal effect, member states commit to enshrine it at constitutional or equivalent level. And the Court of Justice will have competence to review proper transposition of this commitment. This is a sound foundation for sustainable medium to long-term fiscal policies, and a strong signal to markets that Europeans are serious about their new "stability culture".

Secondly, the Excessive Deficit Procedure under Article 126 of the Treaty, which applies to all 27 member states, will apply in a stricter way for the euro area member states.

In future, the euro area member states will commit to accept true automaticity for triggering the deficit procedure from the moment when a member state breaches its commitment to reduce deficits. The same automaticity will apply throughout the whole procedure for any ensuing steps proposed by the Commission, including the preventive arm. Only a qualified majority against the Commission proposal, would be able to stop the process.

The new commitment will add to the Six-Pack automaticity for which this House fought so hard. It will put the Commission at the heart of ensuring fiscal discipline, in line with your position. We will accept this increased responsibility knowing that its democratic legitimacy derives from this House and that it is here that we will be held accountable for our objectiveness and our resolve.

All in all, the agreement on substance at this Summit is quite impressive.

But frankly, we cannot say the same on form. The reason why it took until 5h00 on Friday morning to reach this agreement was not the substance, it was mainly the form: The debate was on whether this should happen through a revision of the European Union treaties, involving all 27 member states and all the European institutions, or should it be outside this framework, with a new treaty? As you know, in the interim report presented to the Heads of State or Government, the President of the European Council, together with the President of the Eurogroup and myself, tabled proposals in line with a treaty revision involving all 27 member states and all the European institutions. Personally, I made every possible effort to agree this fiscal compact fully within the current treaties.

This approach required that all 27 Member States played their part. As you know, one member state, was opposed to amending the Lisbon Treaty. The United Kingdom, in exchange for giving its agreement, asked for a specific protocol on financial services, which, as presented, was a risk to the integrity of the internal market. This made compromise impossible.

All other Heads of State or Government were left with the choice between paying this price or moving ahead without UK's participation and accepting an international agreement among them.

In search of compromise, I tabled a clause providing, in the EU treaties, that any measures adopted by the Council and applying to the euro area only, must not undermine the internal market including in financial services nor constitute a discrimination between the Euro area Member States and the others. Unfortunately this compromise proved impossible and so it was not possible to have a solution that could allow all 27 member states to agree in the framework of the current treaties.

On a more positive note, I must also say that I was encouraged by the resolve of almost all member states to have more, not less integration, to make more and not less use of the Community method and EU institutions, to work for more and not less coherence.

Most Member States made it clear that they do not want to circumvent the community method and the EU institutions. They do not want to diminish the executive role of the Commission nor the prerogatives of your Parliament. The agreement will not replace Union institutions and procedures but on the contrary build on them. And, at my request, they have made a clear commitment to integrate the agreement fully into EU law as soon as possible. This will need to be strongly reflected in the legal text.

The Commission will do all it can so that this agreement is legally safe and institutionally acceptable. The Commission will contribute to these negotiations as guardian of the EU Treaties and of our institutional model.

Let me be clear: the Commission will not accept any intergovernmental treaty that would be in conflict with Union Law.

I will take direct interest in this question, and I am sure this Parliament will do so as well.

In fact, I expect that the European Parliament will be also associated to these negotiations.

So how can we square the circle concretely? How can we progress by way of an international agreement, without eroding the Community method?

This point will require our utmost attention and our joint scrutiny over the next days and weeks. In my view the best way of doing it, is to follow a basic principle: the agreement should contain stronger national commitments, but the EU institutions should act exclusively on the basis of the European Union Treaties. Thus, we will apply the EU's monitoring and correction system as reinforced by the Six-Pack, and there will be no other parallel or competing structures.

The Commission, acting pursuant to the EU Treaties, will monitor how the Member States have been living up to their additional commitments made in this agreement. I intend to make full use of Article 136, by proposing to this House all the legislation that will be needed, to make this construction work, to tie this fiscal compact back to EU law, and to buttress it with the democratic legitimacy of this Parliament.

Honourable Members,

Fortunately we have not seen a split of the EU between the 17 and the other 10. This was the greatest risk ahead of the Summit.

This is not an agreement at 17 plus, but an agreement at 27 minus.

Last week, most Heads of State or Government of the member states showed their readiness to move ahead with European integration, towards a fiscal stability union. They showed that they want more Europe, not less.

Of course, this was not the only subject of the European Council: some other important issues were also discussed last week, such as the annual growth survey, enlargement and energy. I will come back to these tomorrow when we will assess the results of the EU work during the Polish Presidency of the Council. In this moment, I just want to highlight the historic agreement that was signed for Croatia to join our Union.

Honourable Members,

It is indeed very important that member states agreed a fiscal compact, but let me say that this is not enough. The problems in the euro area are not only fiscal, but also financial. And above all, problems related to lack of competitiveness. We need to restore growth and promote employment! The commitment to fiscal discipline is indispensable for Europe, but the reality is that structural reforms for competitiveness and growth enhancing measures are the key to restore not only the confidence of investors, but also, above all, the confidence of our citizens.

And this is why I insist on the need to pursue the comprehensive approach that the Commission has presented in our Roadmap for Stability and Growth. I hope the European Parliament and the member states will support this line and work together for the deepening of the internal market, including rapid implementation of existing commitments on services, energy, innovation and the digital agenda and free trade agreements; swift adoption of pending proposals to enhance growth such as support for SMEs, better regulation, tax initiatives, fast-tracking proposals, especially those that extend the benefits of the Single Market and, last but not the least, targeted investment at the European Union level, including through project bonds. Yes, we need investment at the European level and that is why our MFF proposal and for instance the Connecting Europe Facility addressing the issue of the missing links in networks is so relevant for Europe's growth and employment prospects.

Finally, I wish to highlight that, even if today the attention is elsewhere, green growth remains key to employment in Europe. This is why I welcome the conclusions from Durban, with all major emitters agreeing for the first time to have a new comprehensive and binding legal instrument which shall include limits on CO2 emissions. This was only possible because of the leadership from the European Union: I am very proud of the role of the European Commission in this matter. This shows that with consistent and coherent efforts Europe is able to put its mark on global agreements.

The same kind of coherence and persistence will now be needed for the implementation of the growth agenda for the European Union. This is exactly what our citizens expect from us – Europe of responsibility, yes, but also Europe of solidarity. Europe of stability, yes, but also Europe of growth and employment.

I thank you for your attention.

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