José Manuel Durão Barroso
President of the European Commission
Remarks by President Barroso to the Friends of Europe debate: "Beating the crisis: Could demands for "fairness" re-landscape EU politics?"
Friends of Europe – The State of Europe Conference/Brussels
11 October 2012
Mr Minister, dear Andreas Mavroyiannis,
Ladies and gentlemen,
Dear Friends of Europe,
Let me start by thanking you for inviting me to participate in this discussion today. Indeed fairness is a key value at the core of the European integration. Our Union places human dignity and wellbeing of its citizens at the heart of our efforts.
Our European social model and our social market economy are precisely about combining economic dynamism with social fairness. This is not the model in many other parts of the world - this is the model we are committed to respect according to the treaties of the EU.
The truth is that we cannot have the kind of economy we want in Europe without strong values and principles, including the principles of social cohesion and social justice.
The real strength of our societies rest on the opportunities they create for the most vulnerable.
We have to keep fairness and solidarity at the heart of our actions. This is I believe the glue that holds our societies and our Union together. There are some who believe that because of the recent crisis the social model in Europe is dead. I do not agree. I do not agree because I can say and see that some of the most competitive economies in the world, they are in Europe and they combine high levels of social cohesion with - this is also important to note - high commitment to social contracts and to a culture of social partnership. And this shows that competitiveness in our societies is not in contradiction with social inclusion and with the modern, let's call it welfare state.
Yes, we need to reform some of the most important aspects of our economies if you want to keep the social market economy. But it is not by throwing away what has been a very important acquis of the European societies after the Second World War, which is our social market economy.
So what can we do at European level - because it is important here to make the distinction between the European level and the national level in terms of difficult decisions and policy making – what can we do at the European level to effectively keep fairness and solidarity at the heart of our actions, and to avoid what I would call a "fairness gap" that overshadows our Union's future, that projects in fact the very negative image of the EU among many of our citizens?
I think one point is that we have to get rid of what I call old demons of Europe. Old demons of Europe are divisions of Europe. We have had division between East and West, now I think there is a risk of having a consolidation of division between North and South to a large extent based on prejudices, to a large extent made by myths and stereotypes that are not confirmed by the empirical evidence if you look at of course our societies in a longer period.
From a European point of view we have to make it clear we are in this together and only together will we be able to overcome this crisis.
Of course we need responsibility and solidarity. Solidarity comes with responsibility that is why the so called rescue package comes with conditions on programmes for economic and budgetary adjustment. This adjustment is indispensable, I believe that we cannot, after the leveraging of our economies, after all what happened not only in terms of sovereign debt but also in financial markets we have to deleverage. In many cases, these adjustments are painful, and yes, in many cases they have short term recessionary effects. But this major adjustment will only work if it is politically explained, if it has the political conditions of feasibility and also the social conditions of feasibility.
That is why fairness is important not only from the social justice point of view but from an effectiveness point of view so that the reforms are socially sustainable. This is why it is important that the efforts are fair and equitable. Fairness and equity mean that we must not leave behind those who are most hit by the crisis and that everybody must contribute to the effort. It means that we have to address urgently for instance the problem of youth employment. Following the previous actions the Commission proposed to our Member States, especially to those with highest levels of unemployment. The European Commission will present new actions by the end of the year for young Europeans' perspectives for their future, namely the so called youth guarantee.
We also need to look at the revenue side of the response, namely better and fairer taxation systems, to stop tax fraud and tax evasion, and to put in place a fair and ambitious Financial Transaction Tax. The European Commission proposed the Financial Transaction Tax and I believe now we are going to have the number of countries needed, apparently 11 are already committing, I have not yet received the letters of these eleven countries but I hope to receive them in the next days so that we can go ahead with the Financial Transaction Tax. That is important also from the political point of view, because it shows that we are asking the financial sector to also make a contribution. I believe it is right to do it, because the financial sector which has benefited from a lot of solidarity should now return the favour by showing greater responsibility. And it should also make a contribution that is clear from the citizens' point of view. This is also why we need more responsibility in the financial sector. That is why we need a single European supervisory mechanism. We have put forward a proposal, I expect the European Council next week to make progress on the endorsement of this proposal, because it is critically important in terms of credibility and responsibility for the financial sector.
But we also have to get rid of some incoherent attitudes. We must close the gap between rhetoric and effective actions, and between decisions taken in Brussels and their national follow-up. We have seen this very often.
We all agree that growth is critical. The question now is how to generate growth and what can we do in terms of investment, namely when there is no fiscal space in many of our Member States.
So how can we have public investment in some of our Member States without fiscal space for that?
Our answer at European level is to generate sustainable growth by combining sound public finances, deep structural reforms for competitiveness and targeted investments. Let's be frank, the balance between the three has always been a challenge.
So far I think we can say that we have made good progress in fiscal consolidation, if you look on average, the situation where Europe was and where Europe is, we have made progress of course in terms of financial regulation and creating more effective systems. We have also made progress, contrary to many expectations in terms of creating the financial backstops, the ESM, the famous European Stability Mechanism, was created formally last Monday, the first Council of Governors took place, and many people were betting that it will not be possible to have it. But, we have not yet made enough progress in terms of delivery of our agenda for growth and jobs, Europe 2020 and also the Growth Compact that was recently approved by the European Council. We need to do more.
Part of this is the European budget and as the Presidency of the Council, minister Mavroyiannis has referred, the Multiannual Financial Framework, the European budget is the instrument for investment at European level. It is very difficult to understand how some are saying all the time that we need more growth, that we need more investment, but when it comes to vote on the budget that is precisely for that, for investment and growth, they change their attitude and in fact they are proposing substantive, very substantial reduction of the very realistic proposal that the Commission put on the table. But even in the budget we need to have a stronger dimension in social affairs.
That is why, for example, the Commission has proposed that a least 25% of cohesion policy – so around 84 billion euros – should be devoted to human capital investment by the European Social Fund. It is interesting to see that afterwards this is resisted very much in several capitals, including some we were not expecting to be resisting to it.
This is why we need now to have coherent approach to this MFF, keeping ambition and realism in it, but also, winning Governments' support to such programs like the Globalisation Adjustment Fund or the support for the poorest and most deprived persons program. In fact, these are exactly some of the programs that are now under attack when we discuss the MFF. Why I am raising this issue: because, to have a good discussion on this we have to be completely open. The reality is especially since the beginning of the crisis there has been more drive for European integration. All the steps that have been taken, from the so called six pack of legislation, to the creation of more mechanisms of control, shared responsibility, have been for more, not less integration. But, and this is interesting to note, governments have been much more open to give the European institutions more powers in terms of discipline and control than to give the European institutions instruments for effective solidarity. And this is a very important point because afterwards people should not be surprised that the image of Europe is not getting better, because if Europe appears systematically as the enforcer, the controller, the great artisan of discipline, if Europe does not have some credible instruments of social cohesion, of course people will tend to blame Europe for the current difficulties even if we know that the current crisis was not created by Europe, neither by the euro.
The reality is that we have countries out of the Euro that have exactly the same problems if not bigger problems than those in the euro area because to a large extent the crisis was a result of irresponsible behaviour in the financial sector. And the reality is also that some of the problems that we have now are the result of irresponsible and sustainable debt that was created by governments against the rules that they themselves have agreed in the Stability and Growth Pact.
And now we are responding. I think it is fair to say that we try to draw the lessons of the crisis including the governance, reinforcing the mechanisms of discipline, creating more credibility regarding the coordination of economic policy and this is positive, but I don't see the same commitment when it comes to the point of more mechanisms or instruments for solidarity at European level and this may raise and in fact is already raising a problem of legitimacy or support to the European project as a whole.
That is why I believe that a good way to start changing things is to approve the MFF and show our commitment to a Europe that is competitive, open. The deepening of the Single Market is important and we have been making the case very clearly, but at the same time we also need to have the instruments of social cohesion.
Finally I believe, that it is important in these times of crisis to have a vision about the future. Not just to look at the current difficulties, but to have a combination of ambition with proper sequencing this is why I spoke in my "State of the Union" address in the European Parliament in favour of a a democratic Federation of Nations States as our political horizon and the idea behind it is also an idea of solidarity because I believe we can do more in the short term if we have a vision for the future..
I believe Europe has to be ever more democratic. And European citizens have to have a say in their common future. Because ultimately solidarity and fairness at European level depend also on a strong sense of belonging to a common community and a shared destiny.
I will conclude with this short story that happened to me already some years ago. We were discussing a programme for the most deprived persons in the European Council. The European Commission was making a proposal for reinforcing a programme to help the poorest in Europe, including for food-aid programmes that we give through food banks in Europe, because there are people in Europe that need this kind of support. One of the governments, and it was not a right wing government, said to me in front of all the others Heads of State or Government: "Look, each one takes care of its own poor people". This is called subsidiarity – so we should, at European level, implement strong discipline and controls, but we should leave the social action for the national level. I don't agree. I think it is a real mistake including for the governments that are proposing this, because in that case they will afterwards not have the necessary support when they come to their public to ask for more action in terms of Europe. I think we have to have a frank and open debate on this and I believe the next European elections will be a good occasion for that. That is why I was putting already in place some proposals also to provoke the debate to ask the so-called mainstream parties to leave their comfort zones, not take our European integration for granted and make the case for Europe, including of course this dimension of fairness and justice.
I thank you for your attention.