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European Commission

José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso on the forthcoming European Council on 14-15 March 2013

European Parliament plenary session/Strasbourg

13 March 2013

Mr President of the European Parliament,

Madam President of the Council,

Honourable members,

I will today focus on the economic agenda of this week's meeting of the European Council and the key role it plays in the next phase of our reform path.

It is crucially important to be aware of the debate taking place across Europe about the state of our economy. In each and every member state, political opinion is passionate, public expectations are high, and rightly so.

Over the last months and years, through consistent and courageous efforts at both European and national levels, we have come a long way to fight the root causes of this crisis and to pave the way for a sustainable future.

But we have yet to tackle the most immediate fears and concerns of many of our citizens. We must do everything possible, at all levels, to help them out of the crisis.

There is justified disappointment about the slow recovery of the real economy. Growth on EU average was lower than expected at the end of last year and will be close to zero this year. Unemployment figures are unprecedented and simply unacceptable.

This means we must strengthen our focus and our resolve to respond to this crisis; a response that also addresses the short term needs and does not lose sight of the structural reforms we have signed up to; reforms that we know are necessary and that will form the basis of future sustainable growth. We can see that the reform efforts for competitiveness are starting to bear fruit, correcting very important imbalances in the European economy, most importantly in the programme countries.

And indeed the example of Ireland, the country holding the rotating Presidency of the Council, is a good demonstration of this point.

Let's not forget, less than one year ago analysts were speaking of the implosion of the euro. But now, we see an improvement in terms of financial stability: since their high point in 2009 budget deficits have come down by half and they are expected to get below to the 3% limit by the end of the year, and interest rates paid by a number of member states have gone down significantly. Current account imbalances are being corrected, and exports in some of the least performing member states are reviving.

We can also note the progress in terms of overall economic confidence – with consumer confidence for the euro area improving by 30 basis points over the last months, and business confidence by 20.

However, good news in some key areas should not hide the fact that there has not been enough progress to address the issue of growth, notably in the real economy, and that there was a deterioration of the employment situation. Let me say that, when I see the situation in some of our member states, it is clear to me that some of the costs paid by the most vulnerable in our societies are becoming simply unbearable. Fair burden-sharing must be a core element of our policies.

Honourable members,

Let us also not forget why we are in this situation: we are still feeling the effects of a sorry state of affairs that was fuelled by unsustainable public and private debt, and by irresponsible behaviour by many in the financial sector. We knew that the process of adjustment would always have a negative effect in the short term.

However, we cannot repeat the mistakes of the past, accumulating new debt and leaving structural reforms for competitiveness for later.

In fact, we are correcting those mistakes, and we have reason to show more self-confidence over the progress Europe has made so far.

In the past year alone we have agreed on the Compact for Growth and Jobs, agreed the fiscal pact, inaugurated the European Stability Mechanism, the ECB's Outright Monetary Transactions was announced, we reached a unanimous agreement on the Single Supervisory Mechanism and brokered a deal on the so-called two pack. And let me congratulate the European Parliament on the approval, yesterday, of this very important package of legislation.

We have put flesh on the bones of the European Semester and we are continuing to go forward in terms of financial sector regulation. All these decisions have given a clear signal about the irreversibility and integrity of the euro, and have sent the right message about Europe's capacity to act. On top of that, the Commission has presented its Blueprint for a deep and genuine Economic and Monetary Union, offering a vision of future developments and integration.

We will not allow the momentum for the European Union's reform to slow down.

The proper functioning of the EMU requires that its governance structures are completed in particular in the area of economic policy coordination and support to structural reforms. That will be the focus of the June European Council, and we are already working on specific measures and a time-bound roadmap on the ex-ante coordination of major economic reforms; on the social dimension of the EMU, including the social dialogue; and on a framework for mutually agreed contracts for competitiveness and growth, combined with respective solidarity mechanisms.

At the same time we are pursuing a social agenda as an integral part of our strategy to exit the crisis.

The position we took in the MFF discussions consistently made the same point: that the European investment agenda needs also to focus on solidarity and growth, aiming funds at those who need our support the most. The youth employment initiative, the youth employment package that includes the youth guarantee scheme and the social investment package are just a few examples.

But let's be honest, we need short term measures to reinforce the perspectives for growth. Implementation of the Compact for Growth and Jobs is too low and too slow. There has not yet been enough commitment to address social obligations. We have to be sensible to social needs.

Just yesterday, the Commission has adopted a package of measures on making effective the Youth Employment Initiative and has amended the relevant legislative proposals for the European Social Fund and the Common Provision Regulation on structural funds.

The Commission has acted very quickly on youth unemployment. These measures will include the 6 billion € agreed at the February European Council meeting to combat youth unemployment – it is now up to the Council and to the European Parliament to examine these texts rapidly and adopt them in order to deliver quick and concrete results. With this initiative, I hope that new momentum can be generated at national and regional level to give hope to our young people.

At this point in time, when the crisis is particularly hard on them, we cannot and will not let our youngest generations down.

I want to stress that there should not be any contradiction between the social and the competitiveness agenda. Indeed, we can see that the most successful member states in European Union, indeed some of the most successful in the world, are those with the most effective social protection systems. But this is possible because of their high level of competitiveness, and we should be equally committed to both goals.

Improving competitiveness is not an end in itself but a means to drive prosperity and sustain European living standards and values. Competitiveness is an indispensable element to underpin growth and jobs.

Honourable members,

Efforts at European level can never be an alternative to national reforms and investments.

In terms of productivity, we see that the best performing member states are twice as productive as the lowest performers. We guide and support them towards closing the gap, but the real groundwork has to come from the member states themselves.

It is important that the European Council strongly endorses the priorities and actions outlined in the Commission's Annual Growth Survey for 2013, pursuing growth-friendly and tailor-made fiscal consolidation in all Member States; focused on restoring normal lending to the economy and modernising public administration.

The structural reforms for competitiveness and the measures against unemployment, in particular youth unemployment, deserve special attention in the design of the national reform programmes.

And in particular, the political push to fill the gaps in the single market should be maintained.

Because there are still too many and too significant gaps in the single market; gaps that hamper competitiveness; gaps that restrict opportunities and cost jobs.

The Single Market is just one, but a fundamental source of growth in the real economy. There are other very important ones. We also need an MFF for the next seven years, to ensure the investments Europe badly needs.

And since our trade policy is part of our growth agenda, I would also like to once again underline the significance of the decision to start negotiations with the US on a Transatlantic Trade and Investment Partnership.

The Commission has agreed the draft negotiating mandate yesterday, and we will continue to push hard to bring these economically very promising talks to a successful conclusion. We would like to receive the mandate of the Council as soon as possible so that we could start negotiations by the summer. We will need such new sources of growth just as we will have to further unleash the potential of our internal sources.

Honourable members, let me conclude,

This issue is a reminder of the fact that, despite our economic and also political worries, we should not turn inwards.

Our efforts towards competitiveness and growth are of course about the economy, are about the urgent social needs, but also about our position and influence in the world; about our values and how we support them internally and internationally. About the European way of life.

That is why, in spite of all of our difficulties or precisely because of them, we need the confidence that is indispensable for the process of recovery. This is why we must show the leadership necessary, yes, to recognise the obstacles but also to show the determination to overcome those obstacles.

I thank you for your attention.

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