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José Manuel Durão Barroso
President of the European Commission
Speech by President Barroso ahead of the European Council: "Moving Europe Forward"
European Policy Centre/Brussels
26 June 2012
Chief Executive Martens,
Ladies and gentlemen.
Thank you for inviting me today to take part in this conversation, on the eve of this week's European Council. It will be a pleasure to exchange views with so many distinguished EPC members today.
Let me start by setting out what is at stake at this summit.
The last weeks have been a time of heightened tension in the European Union and in the Euro area in particular. It is now clear that the world expects Europe to commit to credible and concrete solutions to become more integrated and more united. Indeed this is now a real systemic global necessity if we are to ensure worldwide financial and economic stability.
We are now, as I have been saying for some time, in a defining moment for European integration. We must articulate the vision of where Europe must go, and a concrete path for how to get there. I am not sure whether the urgency of this is fully understood in all the capitals of the European Union.
We must be realistic in what we can expect from one single summit of European leaders. But I believe this European Council can – and indeed must – give strong impetus to our growth agenda, through concrete measures to stimulate the economic activity, while also setting out a longer-term process to build a stronger, genuine Economic and Monetary Union.
Let me explain briefly what I mean by that.
I will be very brief on the first of these, namely measures to stimulate the economy, hoping that I will be able to elaborate more later during our conversation.
In our approach, we need both fiscal consolidation and growth. This growth can only come from the combination of sound public finances, deep structural reforms and targeted investment. We should not forget trade, internal and external, that is, and must remain, an important source of European growth.
We expect Member States to agree to a "comprehensive package" of growth measures. These are significant measures that the Commission has been proposing over the last year and that will be backed by Europe's Heads of State and Government, for example the increase on the EIB lending capacity, project bonds and a more targeted use of the EU structural and cohesion funds.
In addition, Member States should endorse, in full, the Country Specific Recommendations that the Commission set out on 30 May. These reforms are about changing head-on practices that impede our competitiveness and stop our markets working as they should.
The measures in this growth compact are major decisions that will tackle the roots of Europe's problems, while at the same time oiling the wheels of the economy through targeted investment to get the economy moving again. Indeed, to complement the crucial reform effort, we must invest in projects and in areas where money is badly needed to spur growth. And the Multiannual Financial Framework (MFF), the European budget, should be seen as part of our investment in growth.
Ladies and gentlemen,
On 23 May, the European Council gave a mandate to its President, in collaboration with myself, the President of the Eurogroup and the President of the European Central Bank, to present a vision for the future of a more deep and integrated Economic and Monetary Union.
The report that we will present at the European Council is the start of the process towards deeper integration with a focus on those Member States which share the single currency. It builds on the bold efforts towards greater stability, coordination and growth that the European Union has taken since the start of the crisis. It seizes the moment to put these efforts in the perspective of a full Economic and Monetary Union, in particular the Euro area, and identifies the main building blocks of such an endeavour. It is a concrete demonstration of our unwavering commitment to the single currency and to the European project.
This integration process should be progressive. It should start with steps that can be taken immediately without a Treaty change. These would lead to longer term steps that may require such changes. At its heart will be a guiding concept - that greater solidarity and greater responsibility must go hand in hand: each step towards further solidarity would be accompanied by a corresponding step towards greater responsibility. At its heart will be a guiding method – the Community method that ensures democracy, legitimacy, accountability and inclusion.
What is at stake is not only the economic integration, it is also the overall economic confidence in the Euro area, and indeed, our commitment to the European project. This is why we need to be bold and define the way forward.
For a genuine Economic and Monetary Union to be established, I think that we need a banking union, a fiscal union and further steps towards a political union.
The first of these building blocks that can be achieved quickly without Treaty change is an integrated financial framework, a "banking union".
Since the first days of monetary union, the pace at which the finance and financial institutions have operated, integrated and moved across borders, has far outstripped the pace of cross-border supervision and regulation. The crisis has starkly revealed the extent of this insufficient supervisory coordination. As a response, the European architecture for financial supervision was significantly improved. But we now must go further.
At the same time, a vicious circle has become established, whereby the use of taxpayers' funds to rescue banks makes sovereigns weaker, while the increasingly risk-averse banks stop lending to businesses that need funds, making the economy – and the banking sector with it – slow down, which again further weakens the sovereign.
We can break this negative cycle now if we are bold enough to establish a strong and integrated financial framework. A single rulebook is vital for the single market in financial services. Building on this, we should swiftly establish a single European banking supervision and a common deposit insurance and resolution framework.
The Commission has already put forward proposals on capital requirements as well as on deposit guarantee schemes and common bank resolution tools including mutual lending between national funds. These proposals should be decided on by the end of this year. We intend to present further proposals in the coming months on a common European supervisor and a common deposit insurance and resolution scheme, including common funds paid for primarily by those banks that are overseen by the common European supervisor.
Our starting point should be the 27. But we must recognise that some countries do have opt outs. These opt outs must be taken into appropriate account in the future architecture. But they remain the exception, not the rule. Those who wish to advance must be able to do so. But enhanced cooperation or properly circumscribed derogations can allow for this without creating a risk for the integrity of the Single Market and the integrity of the European Union.
The second building block is to develop an integrated budgetary framework, a "fiscal union". The crisis has again highlighted the spillover effects of our budgetary and fiscal policies. In a more integrated economic and monetary union, sound fiscal positions will not be optional, they will be non-negotiable. We propose to look at further steps that may require changes to the Treaty. Let me tell you here that fiscal union is about much more than just euro bonds or stability bonds. It also means more coordination in taxation policy and a much stronger European approach to budgetary matters at national and European level.
These decisions on deeper economic, financial and fiscal integration imply major changes to the way our citizens are governed and to the way their taxes are spent. Greater democratic accountability and legitimacy are absolutely crucial. And here comes the third building block we propose to look at - a more integrated and stronger political framework, or a "political union".
These developments must be steered by the Community method, with due participation of the institution which is the basis of democratic legitimacy at the European level: the European Parliament.
We must look at the role and competences of national parliaments in European affairs, and we must enhance the links between the national parliaments and the European Parliament. But in the interests of coherence, in the interests of democracy, and in the interests of openness and transparency, we should not create new or separate institutions. There is one European Union, there is one directly elected European Parliament, and there is one European Commission, which is here to defend the interests of each and every Member State, and to promote the integrity of the European Union in its entirety. On matters of European competence, the Commission is the economic government of Europe. I stand for unity, not division. For integration, not fragmentation.
Ladies and gentlemen,
I will stop here, to give time for your questions and our discussions. But before I do, let me leave you in no doubt – this crisis is the biggest threat to all that we have achieved through European construction over the last 60 years. Faced with this stark reality, standing still is not an option. A big leap forward is now needed. It may not be simple. It will require ambition, vision and determination to enact far-reaching reforms. But I believe this is the best, and indeed the only way forward that can give our citizens the prosperity, our businesses the opportunities, and our young people the futures that they all deserve.
Thank you for your attention.