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European Commission

Maroš Šefčovič

Vice-President of the European Commission

The EU in 2013: how to restore confidence and growth?


31 May 2013

Ladies and Gentlemen

The European Union will cease to exist in 2018.

Don't worry, this is not in any way European Commission policy! It is in fact a vision of the future presented in a provocative exhibition by the Belgian Artist Thomas Bellinck currently taking place in Brussels and which I think neatly sums up the crossroads at which the EU is now standing.

Thomas Bellinck is in fact a pro-European – but he believes, like many others, that the current economic and political crisis that is wracking the EU represents a true 'make or break' moment for Europe.

In other words, how we respond to the crisis, the new structures and policies that we put in place to ensure it never happens again, will set the tone for the future development of the EU as a whole, not just the economic governance of the Eurozone.

One thing is certainly clear: European citizens have little faith in their leaders' ability to find a sustainable and successful solution to Europe's current crisis.

A recent survey of 7,600 people in eight EU member states by the Pew Research Center, revealed that faith in the EU has fallen by 15 percentage points over the past year, from 60 per cent in 2012 to 45 per cent now.

And it also revealed a growing divide between the 'northern' EU Member States, led by Germany, and those in the south – Greece, Spain, Italy, Cyprus, etc., - where the most extreme austerity measures have taken their toll.

Most worrying of all, perhaps, the survey also showed that faith in the Union is declining most rapidly of all in France, traditionally of course one of the EU's strongest and most committed supporters.

All of which reinforces the idea that we are indeed at a crossroads: the measures we have already introduced as a response to the Eurozone crisis are starting to have an effect, and we can perhaps finally start to see light at the end of the tunnel; and yet at the same time the public perception of the EU and its response to the crisis has never been lower.

This in turn translates in some Member States into a rise in popularity of anti-EU parties and calls for quitting the Union altogether. All of a sudden that proposed end of the EU in just five years doesn't seem quite so far-fetched!

So what can we do – indeed, what have we already done – to ensure that this doomsday scenario does not in fact become a reality?

The reality is that we have progressed extremely rapidly since the crisis first hit five years ago. We have put into place a raft of measures designed, among others, to

  • ensure better economic governance across the entire EU (6-pack, 2-pack, fiscal compact)

  • support Member States in their efforts to sort out their debt problems and stop any possible future economic collapses from contaminating the rest of the Eurozone (the EFSF/ESM or €700bn firewall)

  • and create economic growth, jobs and competitiveness (Europe 2020/European Semester)

But it is not just about how quickly we have reacted of course: it is also a matter of HOW we have reacted.

It is not an exaggeration to say that comprehensive overhaul of the Eurozone economic governance that we have put in place would have been unthinkable before the crisis took its toll.

Take for example some of the most recent changes – the so-called two-pack – which among other things give for the first time a European 'right' to assess national budgets. Note that I say 'assess' – this is not a power of veto, or an attempt by Brussels to take power away from national parliaments.

Instead it is part of a more comprehensive approach to economic governance and programming designed to ensure that the problems of the past – in this case, unrealistic budgeting leading to excessive public debts – do not happen again.

Critics, of course, still ask why this sort of assessment needs to be done at the European level, when national governments are capable of doing it themselves.

There are two answers to this: first, the crisis has shown that national budgets and national economies are far more closely connected than ever before – not just within the Eurozone but across the EU as a whole. This means that poor decision-making in one country can have a knock-on effect in others – as was the case with Greece. This new right to assess national budgeting is an attempt to address these concerns by seeking to ensure that as each Member State draws up its national budget, it takes into account the possible effect it might have on the rest of the Union. This is of course best achieved at the European level.

The second answer is a little harsher: national governments aren't, in fact, capable of doing it themselves!

A large part of the EU's economic governance strategy existed before the euro crisis; there have long been rules on excessive deficits and debts (the Stability and Growth Pact) but part of the reason why Europe is currently suffering in the midst of its worst ever crisis is simply that many Member States chose not to follow these rules.

The approach we've introduced over the last few years now means far tougher sanctions for countries that do not abide by the rules, a bigger role for the Commission in policing them and a more collaborative approach to decision-making that should allow us to catch any potential problems far earlier in the budget cycle and thus avoid knock-on effects at a later date.

In short, the answer to our problems is 'more Europe', a deepening of cooperation and a pooling of sovereignty that is unprecedented in the history of the EU.

But again, let me repeat: 'More Europe' does not mean 'more Brussels'.

It is about power-sharing, not power-grabbing. It is about working together towards a common goal, agreed by all. It is about everyone following the same rules and everyone making the same commitments towards reform and investment.

The best example of this, for me, is the European Semester, our new approach to economic policy coordination.

Each year the European Commission undertakes a detailed analysis of EU Member States' programmes of economic and structural reforms and provides them with recommendations for the next 12-18 months.

The European semester starts when the Commission adopts its Annual Growth Survey, usually towards the end of the year, which sets out EU priorities for the coming year to boost growth and job creation.

Then, in March, EU Heads of State and Government issue EU guidance for national policies on the basis of the Annual Growth Survey, and a month later Member States submit their plans for ensuring sound public finances and strategic reforms to drive growth.

The Commission then assesses these programmes and provides country-specific recommendations as appropriate, usually around May or June, which are then endorsed by the European Council.

Finally, at the end of June or in early July, the Council formally adopts the country-specific recommendations for each Member State.

What is key here is that this is a collaborative approach – Commission, Council and Parliament are all involved – that allows national policy-makers to see the bigger picture before they start their budgeting process.

But is it undemocratic? Is the Commission, through its CSRs, somehow dictating to the elected governments in each Member State what they must do?

Of course the answer is no! The Commission's recommendations are just that – a line to take for each Member State to make the most of its investments and reforms. And, don't forget, they are endorsed by the Council – by Member States themselves – who, in doing so also pledge to actually take the necessary steps to follow the recommendations.

And yet, as I said at the beginning, we still have this crisis of confidence and faith in the EU, a niggling (and growing) sense that it is somehow autocratic and undemocratic, run by Brussels with scant regard for the realities on the ground.

Regardless of whether this is true or not – which of course it is not – it is nonetheless the overriding perception, and one that needs to be urgently addressed, all the more so as the deeper integration of economic and monetary union segues into closer political union.

That's why we're determined to make things as transparent and democratically accountable as possible.

Under the two-pack, national budgets will remain the responsibility of national parliaments. What the new rules mean is that they will indeed have to act responsibly in their budgeting.

Of course, the urgent need to address this so-called democratic deficit predates the euro crisis by some considerable time.

This is one of the reasons why the Lisbon Treaty has given a much greater role to both national parliaments and the European parliament, as the defenders of European democracy.

But again this means acting responsibly: national parliaments have the power to get more involved in the European decision-making process, but it is still up to them to use it, to make the commitment to be part of the process. Citizens clearly expect them to do just that, to ensure that democracy and accountability remain at the forefront of everything that we do in the EU.

So what of the future?

With its vast single market of 500m consumers, Europe has the potential for massive growth, just what we need to kick-start the economy. But to achieve this, we have to break down the last remaining barriers to a true single market, and this will be a major focus for policy-makers over the years to come.

Of course, the process of reform and investments will continue in each Member State, with some tough decisions still to be taken in some countries. But with the European Semester in place, backed by the economic governance reforms, we should start to see improvements and, more importantly, protect our economy from more problems in the future.

Indeed, we're already making headway on fiscal consolidation. Starting from an overall deficit of above 6% of GDP in 2010, we now expect it to fall to 3.4% in the EU and 2.9% in the euro area this year, on average. But there is still work to be done: we expect public debt to continue to grow in the near future, although at a slower pace, reaching 96% of GDP in the euro area and almost 91% of GDP in the EU 2014. This is an increase of nearly 30 % since the start of the crisis.

But we need to continue our efforts to deepen economic and monetary union, and to break the link between sovereign debt and bank debt. This is why we have proposed an integrated system of banking supervision and resolution, a fully-fledged banking union. We've already got an agreement on a Single Supervisory Mechanism, and the Commission is preparing the next step, a proposal for a Single Resolution Mechanism.

These are longer term measures that will strengthen our overall economic situation, but if we want to restore citizens' faith in the EU, we need some more immediate results, that show how working together at the European level can benefit us all.

That's why we've proposed a number of measures to boost competitiveness.

With 75% of our exports, 80% of private investment in research and innovation and around 75 million jobs, industry plays a major role in Europe. We want it to play an even bigger role, and we have set the explicit objective of raising the share of industry in GDP from the current 16% to up to 20% at least by 2020.

Hand-in-hand with this goes the need for a new focus on research, innovation and skills, and we are active here too, with proposals for a new unitary patent adopted last year, faster standard setting, modernised procurement rules and a European passport for venture capital funds, for example.

But we need to ensure that we have the means to achieve these goals. We have proposed a 30% increase in vital research and innovation funding (to around €71 billion) for the next seven years, as well more money for vital pan-European networks (the so-called Connecting Europe facility: €40bn proposed by the Commission, but €29bn agreed at the February European Council) – but without a final and realistic agreement on the overall EU budget – the Multiannual Financial Framework – we are leaving European businesses in limbo, without the guarantee of EU investment in the necessary infrastructure they need to grow.

That's why it's so important for Council and Parliament can reach an agreement quickly on the overall budget – we only have seven months left before the start of the next budget period!

Another area where we have a clear advantage by working together is in international trade.

We firmly believe that the opportunities offered by emerging global economies far outweigh any potential threats: if we were to successfully complete all the trade and investment negotiations we are currently engaged in, Europe's GDP would be boosted by more than 2% or around €250bn! A deal with the US alone would lift GDP by 0.5% - roughly equivalent to two-thirds of the yearly EU budget! But this kind of deal can only be achieved at the EU level – after all, the interest on the other side is access to the single market, not 28 different markets!

So, will we really be facing the implosion and collapse of the EU in just five short years, as Thomas Bellinck would have us believe?

The short answer of course is no! We have come far too far and invested far too much to ever let that happen.

But the fact remains that we still have much to do to ensure that we take the right route away from the crossroads at which we currently stand. It will take time, it will take effort, and it will take commitment, but ultimately I am convinced that we will succeed.

And it will only be by succeeding, by showing that Europe can walk the walk as well as talk the talk, that we will be able to start restoring faith and confidence in the European project.

I thank you for your attention.

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