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European Commission

Olli Rehn

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

Vice-President Rehn's remarks at Press Conference of the informal ECOFIN Council meeting

Informal ECOFIN Council Meeting

Nicosia, 14 September 2012

I would like to share with you a few brief observations on the European economy because I presented the current state of the European economy to the Ministers. The Commission will present its next fully-fledged forecast in early November, but we can already say on the basis of recent soft and hard data that we expect a recovery to set in next year, albeit a more gradual one than previously forecast, and one that is subject to risks. Moreover, trends in growth and employment remain very uneven across Member States and unfortunately in many countries unemployment is reaching very high levels for the moment especially youth unemployment, which is a serious cause of social concern.

Europe is undergoing a difficult but necessary adjustment of imbalances, both external and internal, which accumulated during the first decade of the euro until 2008 basically. This process will inevitably take time to complete. The rebalancing needs are considerable. But the good news is that the process is now well underway. You can see it when you look at the reduction in current account deficits and improvements in unit labour costs of several deficit countries in the European Union.

Countries that have been running current account deficits for a long time need to achieve surpluses in order to begin to reduce their debt. This demands further private sector deleveraging and fiscal consolidation, as well as improvements in economic competitiveness to facilitate a rebalancing of the economy towards exports.

As regards public finances, the situation is steadily improving. In 2009 and 2010, fiscal deficits in the European Union were in the order of 6%. Last year they had been reduced to around 4%. This year they are expected to be somewhat above 3%, which is a further welcome improvement.

What is important now is that we keep up the momentum and that our Member States remain focused on sound budgetary policies and enhanced structural reforms, working in the framework of the European Semester and our strengthened economic governance.

We can facilitate this process, when necessary, by making efficient and flexible use of the variety of short-term market stabilisation tools that we now have at our disposal, I am referring for instance to the entry into force soon of the ESM as well as to the decision on the Outright Monetary Transactions by the European Central Bank. This is about shielding vulnerable countries from intense market pressure, not so that they can take their foot off the pedal of reform, but so that they have the time to implement and see through the reforms they have started.

And for the longer term, we must continue with determination along the path towards what I have called EMU 2.0. There is a clear process in place to achieve this, led by President Van Rompuy with the active involvement of Presidents Barroso, Draghi and Juncker. By December we will have a timeline and roadmap towards a genuine economic and monetary union, or to put it another way, a genuine economic union to complement and complete the monetary union we have had since 1999.

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