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European Commission

José Manuel Durão Barroso

President of the European Commission

Statement by President Barroso on the Country-specific recommendations package 2013

Press conference/Brussels

29 May 2013

Good afternoon ladies and gentlemen.

Europe must move beyond the crisis. How to do this is set out in today's Commission package. Since each of our Member States is in a different situation it is only natural that sometimes they see solutions differently. But the European Commission has the obligation to look at Europe as a whole. What it does, and it is unique in that sense, is to offer a comprehensive response that is both tailored to individual Member States and good for the European economy as a whole. Europe needs a consensus on the policies that are both right for us as a Union, and right for each Member State.

Let me highlight a number of key points from our analysis.

In the short term, recovery is hampered by the high levels of debt, both public and private debt, that have accumulated in many Member States, and because the repair of the banking sector is slow to bear fruit. Moreover, the size and urgency of the imbalances built up over several years have led to significant adjustments, which now have to be carried out simultaneously across Europe with a strong interdependence between the European Union economies. Since the current crisis is structural as well as cyclical, the pace of reforms needs to be stepped up across the European Union to secure recovery and ensure the rebalancing of the economy. "Deficit" countries need to boost their competitiveness and "surplus" countries need to remove the structural obstacles to the growth of their domestic demand.

The Commission's analysis of national reform programmes clearly shows that Member States could do more to help themselves get back to growth and move Europe beyond the crisis.

So, in today's recommendations, we urge Member States to continue and step up their efforts. Indeed, there is no room for complacency.

Many of our recommendations directly seek to boost competitiveness and make our economies more dynamic.

Let me give you some examples. Already in our Annual Growth Survey we had highlighted, as a key priority, restoring the normal lending to the economy.

Indeed, a key problem in many Member States is the lack of access to funding for companies. Without bank funding they can hardly survive, let alone invest, take new orders or hire new staff. Small and medium-sized enterprises in particular are feeling the pinch as bank loans dry up. Germany is the only country in the European Union where SME lending has risen. The transmission of lower interest rates and the restoration of normal lending to the economy, especially in the periphery of the European Union are still impaired.

Completing the architecture of the Economic and Monetary Union, the EMU, particularly the Banking Union, will be essential for underpinning future sustainable growth and preventing the re-emergence of imbalances. And we need to make sure banks continue to tidy up their balance sheets.

We also need to provide companies with alternatives to bank loans – for example, private equity, risk-sharing instruments with the European Investment Bank or grants from the European Commission. On some of these aspects we are working actively not only with the involvement of the European Central Bank but also directly with the European Investment Bank. You will find these priorities in terms of the funding, lending, to the economies, reflected in our recommendations to 10 Member States. And I am now speaking about the recommendations for the countries that are not in a programme, because as you know for them there is a special document.

This year's recommendations call on all countries to be more ambitious when it comes to growth-boosting economic reforms.

Greater efforts are needed to create conditions that favour business development. Member States must do more to complete the Single Market in areas such as energy, transport and services. Several of our recommendations address issues such as energy prices, broadband development, competition in the services sector and also red tape.

We also need to spend smartly on research and innovation to create the jobs of the future. We have asked 9 Member States to step up their efforts on this front, which will also help the European Union as a whole to catch up with its key competitors worldwide.

But to tackle the jobs crisis more directly, other measures are needed, and we address these in many of our recommendations.

In the first place, labour market reforms, which are the best way to kick-start job creation:

This will be particularly helpful for the young and the long-term unemployed, who have difficulty breaking into the jobs market. We have recommended that 20 Member States step up their action on this front by putting in place active labour market policies – for example, by beefing up public employment services, so they can provide personalised guidance for those seeking work, or by putting in place the Youth Guarantee, based on the Commission proposal already agreed by Member States. But here the key is implementation.

We need to conclude the MFF negotiations so that we can implement a €6 billion Youth Employment Initiative in the next budget, which can provide important support to Member States on this point.

Many of the actions to be taken at European Union level are already on the table. They now need to be decided and implemented more swiftly. The Commission is working hard, ahead of the June European Council, to make sure that happens.

Another point that deserves attention in our recommendations is the need to monitor the critical relation between the development of wages and productivity.

Our analysis shows that, when wages grow faster than productivity, the price to pay may be higher unemployment. Our recommendations to 5 Member States encourages them to take steps to make sure wage increases reflect real gains in efficiency in each case.

The cost of labour is also influenced by the burden of taxation, when it falls disproportionately on workers. This is an issue in 21 Member States and we are advising them to look again at how they raise revenue and consider shifting to more consumption, recurrent property taxes or environmental levies.

All these matters regarding the labour market, and also taxation, will be addressed completely by László Andor and Algirdas Šemeta that, as you know, have this direct responsibility in the Commission.

Finally, we need to improve the skills and qualifications we get. We are now advising 22 Member States to reform their education systems because in Europe, we lack the qualified people to fill the jobs of the future. In this context, the issue of the system of vocational training is specifically mentioned.

Despite the fact that almost 11% of the working age population in Europe is unemployed, we estimate that there will be up to 900,000 unfilled vacancies in the digital sector by 2015, just as an example. Other sectors with great job potential are health care and the green economy. We need to do much better to reduce this skills mismatch.

Investing in people also means taking care of the most vulnerable. The fact that more than 120 million people are now at risk of poverty or social exclusion in Europe is a real worry, and I have been speaking of the situation of social emergency we have in several of our Member States. That is why we have recommended that 9 Member States strengthen social safety nets and better target benefits to those in real need. These structural reforms will strengthen Europe's economy and will make confidence take root, but only if we also continue our efforts to ensure sound and sustainable public finances.

They are the foundation of a healthy economy, as growth fuelled by public and private debt is not sustainable. We have learned this during the crisis. This is artificial growth, growth based on debt, public or private debt.

However, because of the good progress made, we now have the space to slow down the pace of consolidation, depending on the situation in each country.

In this spirit, the Commission has made recommendations to several Member States under the Excessive Deficit Procedure. Vice-President Rehn will present them to you in detail. They were formally adopted this morning.

Let me highlight the fact that the Excessive Deficit Procedure and the Country-specific Recommendations go hand in hand. Together, they constitute our programme for stability, growth and employment.

So in a nutshell, and I think that can summarize the basic line of our decisions today: while fiscal consolidation is on-going and should continue with a pace that reflects the situation in each country, Member States should now intensify their efforts on structural reforms for competitiveness. The social emergency in many parts of Europe and the increasing level of inequalities in some regions add to the pressing need for reforms. But because many of these structural measures take time before delivering concrete results in terms of employment creation, specific focused action is needed to deliver short-term results for the unemployed, and especially young people. In parallel, all systemic efforts to reinforce Europe's economic governance, especially the Banking Union, should continue with determination. It will not be acceptable, a relaxation of efforts in that matter.

This is the European consensus I am calling everyone to rally around now! We have to overcome the ideas of policies coming just from one or the other capital. We need an European consensus. And this consensus is vital for confidence and confidence is key for growth. So this is the European consensus that I will propose to the European Council in June. This is the plea I will take to the European Council – backed up by the in-depth analysis done by the Commission, an exercise that - I want to underline as well - was done in closer partnership with the Member States.

To be successful a crisis strategy has to be properly designed and to have the necessary political and social support. That is particularly true in countries such as Greece, Ireland, Portugal, which are undertaking impressive reforms. And Cyprus, that has now also embarked on similar efforts. But it is indeed important for all our Member States.

It is in the interests of Member States to implement these recommendations and agree on the basic lines for Europe's future. We should avoid giving counter-productive signals that can only undermine confidence.

The debate about austerity versus growth has been to a large extent futile and even counter-productive. Instead of fuelling these debates that are divisive and can only undermine confidence, our capitals should focus on promoting the European consensus which the Commission is putting forward, with more determined and urgent action on growth-enhancing reforms. And, at the same time, more focused action to address unemployment, especially youth unemployment.

The crisis has left us with the strong conviction that we need to reform, and to reform now. The cost of inaction will be very high. The benefit of taking action now is that Europe will emerge stronger from this crisis. And I really believe that if we implement these programmes Europe will become much more competitive, much more resilient, much stronger than before the crisis.

Thank you for your attention. I am ready for your questions.

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