Speech - Restoring confidence in the EU
European Commission - SPEECH/13/895 07/11/2013
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Member of the European Commission, responsible for Internal Market and Services
Restoring confidence in the EU
European Policy Centre Annual Conference: Debate on the ‘State of the Union’
Brussels, 7 November 2013
Good afternoon ladies and gentlemen,
My thanks to Philippe Maystadt and Fabian Zuleeg for inviting me here today.
One overriding theme of today’s discussions has been that of regaining confidence. It is obvious that the challenges are huge.
The crisis exposed three failures that have long existed in Europe:
1) Failure to control public debt.
2) Failure to regulate the financial sector properly.
3) Failure of economic governance, especially of the euro.
As a consequence, people started to lose confidence. For instance, less than 50% of Europeans believe that the EU protects them from the negative effects of globalisation.
We have a duty to restore people’s confidence. Give them confidence that the worst of the economic crisis is behind us. Confidence that the new structures we have in place are fit for purpose. Confidence that we can make the most of our unique single market. And confidence that we can build a brighter tomorrow.
These themes will come up time and again before the European elections next May.
And we all need to be ready.
To give Europe’s citizens and businesses faith in the future.
And faith in the EU.
I - The first key to restoring confidence is to address the problems in the financial system
This is where the crisis started in the first place. Let’s not have short memories.
To trust the system again, people need to know that it is regulated.
To make sure that every actor - including hedge funds; every financial market; and every product including OTC derivatives; are regulated in a robust and transparent way.
For nearly four years now, our regulation agenda has had one overriding goal:
People also need to know that banks are strong enough to resist shocks.
We demand from banks to hold more and better capital, while strengthening their risk governance and reigning in the excesses of the past.
People need to be able to trust the advice given to them by their banks.
We proposed new rules to ensure retail customers across Europe receive proper advice and full, understandable information.
Finally, people need to know that the financial system will no longer bring down the wider economy.
So, we created new supervisory authorities to make sure banks, markets and insurance companies are supervised adequately and in a similar way across the EU.
And as you know we are on our way to the banking union. The crisis has shown us that Europe badly needs this banking union. Our economic and monetary union is not sustainable if banking markets are fragmented, as they are today.
And it is not sustainable if we cannot break the negative links between sovereigns and banks.
The first important pillar of the banking union, the Single Supervisory Mechanism, has finally become law. And the ECB has started its comprehensive assessment of banks’ health.
When the ECB becomes fully responsible one year from now, the banking system of the euro area will have completed its restructuring process – started five years ago.
I recognise that Europe has been slow, but that is because “democracy” time is necessarily longer than “market” time. It is also because of the way it has approached the necessary restructuring. We will only manage to complete the process by being in our approach.
Better supervision can only work if proper resolution rules and processes are in place.
It is essential that the Bank Recovery and Resolution Directive is adopted before the end of this year. And it is essential as well that by the end of this parliamentary term we complete the negotiations establishing a single resolution authority. And a single resolution fund in the euro area.
Putting these structures in place is absolutely imperative if we are to succeed in restoring confidence. They break the link between banks and sovereigns. To avoid using taxpayers’ money to prop up failing banks. And to return banks to their rightful role in funding the rest of the economy.
II - Ladies and gentlemen, we also need to restore confidence in the economic governance of the euro area.
The sovereign debt crisis has proved that we cannot have a single currency and eighteen different parallel and sometimes competing economic policies.
We are fixing this. Coordinating economic policies better through the European semester. That’s the very important job of my friend and colleague Olli Rehn.
And this year, for the first time, we launched a new system for coordinating budgetary policies. All euro area Member States presented their draft budgets for 2014 to the Commission and to the Eurogroup.
This month, the Commission is assessing these draft budgets. To see whether the proposed measures are in line with the European fiscal rules and the relevant Council recommendations. Looking in particular at their impact on public debt.
And let’s be clear, it wasn't "Brussels" that created a level of public debt that is 93% of GDP on average in the euro area.
But "Brussels" is trying to encourage Member States to return to more responsible behaviour. It is not sustainable to borrow from our children for our living allowances today.
The purpose of all this is not to force euro area countries to sacrifice economic sovereignty. The Commission is not dictating national economic policy.
It is about increasing transparency. Showing that everyone is playing their part. Fulfilling their obligations. So that we can restore confidence between peers.
This crisis has shown that the problems of some very quickly become the problems of all the others.
As you can see, we are tackling three of Europe’s failures:
III - But there is a fourth failure we need to tackle: lack of competitiveness. We need more competitive economies:
In each individual country. In Europe more widely. And with our partners around the world.
Each individual EU country has to work at its own competitiveness. This has two core elements.
The first is costs; primarily the cost of labour. I’m not talking about cutting wages. But how some countries need to look at the level of social charges and how these could be reduced to encourage companies to grow employment.
The second is non-cost-related competitiveness.
For instance obstacles to entry to certain professions or the heavy administrative burden on entrepreneurs. The European Semester encourages each EU country to address these kinds of issues and to commit to measures to boost growth and jobs.
At European level, the single market fuels our competitiveness. We now need to go that extra mile.
The digital single market is one area where it is clear, as my friend Neelie Kroes shows with force, that we have not yet tapped the potential for growth. We cannot afford to miss out on the potential of this sector. Research shows that Europe could add 4% to its GDP by 2020, if it can stimulate the fast development of the digital single market. E-commerce could account for up to 20% of employment and growth in the next five years. Our public authorities could achieve cost reductions of 15% to 20% by moving to e-government.
So there is still a lot that needs to be done. For instance in terms of rolling out high-speed communication infrastructure; making payment services in the EU more efficient and secure; streamlining delivery systems; and taking e-government to the next level.
Work on the Commission's proposals in these areas needs to be speeded up. So that they can be adopted within this parliamentary term.
IV – I am also convinced that now is the time to move towards a new industrial policy for Europe.
We are working on this with Antonio Tajani.
Those who look at industry as a thing of the past in Europe could not be more wrong. For every job created in the industrial sector, another two are created in related services.
Paying attention to our industrial strengths does not only mean supporting traditional sectors like steel and shipbuilding. We need also to be at the forefront of clean cars and green buildings. New sources of energy. Defence materials. And invest together in key enabling technologies like nanotechnology and advanced materials.
I am convinced that the right protection for our industry is not protectionism but investment and investing together.
We also need to create an environment in which industry can develop. Through progressive taxation, rather than ever-higher taxes on labour. We need to encourage innovation, including through the European patent. We need businesses, the state, universities and research centres to work together to translate innovative discoveries into real-world applications.
We need to be there with the right support and the right finance – public, bank-driven or other finance - at the right time.
We need Europe to be the home of global standard-setting in new sectors.
We did it for GSMs, there’s no reason why we can’t do it for tomorrow’s must-have technology.
And we need our trade policies to be supportive of European businesses.
So that they can once again be world-beating exporters.
It is not the time for hesitation or naivety.
V – For it is at the global level, too, that Europe needs to prove how competitive it can be.
We recently agreed a comprehensive trade deal with Canada. Once implemented, this deal is expected to add some 12 billion euro to the EU’s GDP each year.
The prize of a successful trade deal with the United States could be ten times greater.
A successful Transatlantic Trade and Investment Partnership, TTIP, could boost the EU’s economy by 120 billion euro a year. Europe comes to the TTIP as an equal partner.
We have just as many demands and expectations as our American partners.
The first condition for success is that the US takes steps to rebuild the confidence lost in part after the Snowden revelations.
One of our critical objectives with the TTIP is to improve market access for EU companies in US public procurement, especially at state and local levels.
We also want the TTIP to include a chapter on intellectual property rights. To build bridges between our two different systems. And to find ways to converge approaches so we can reduce costs and foster innovation.
As regards financial services, the TTIP is an excellent opportunity to put cooperation between regulators and supervisors on a stronger base. TTIP is the platform for mutual reliance.
This would lead to consistent outcomes, it would help to minimise differences, while fully respecting each other’s regulatory regimes and legal traditions. And making enforcement more effective.
One point: there will be no agreement on market access in financial services without an agreement on the regulatory framework.
All of which should help Europe’s firms to compete in the global market.
VI – To conclude,
Ladies and gentlemen, we sometimes get so caught up in addressing what is wrong with Europe that we forget to underline what we do well.
Despite all our problems, European countries and cities score year after year at the top of global “quality of life” surveys.
We have managed to create advanced market economies without losing the solidarity that holds our societies together.
We still have a strong social fabric, with families and communities at its heart.
I strongly believe that we will not have sustainable economic performance without social cohesion.
It is no accident that the waiting list of applicant countries to join the EU is still long.
Or that people from across the world dream of making a life here.
And a majority of EU citizens believe that they are better off in the EU. When asked if their individual countries would be better placed to face the future if they were outside the EU, 56% of people did not agree. 1
This is what we need to build on. These are the messages we need to get across.
We all know that ‘anti-everything’ political forces are growing.
And that they will be doing their best to paint a picture of themselves as being the answer to ordinary voters’ concerns before next May’s European elections.
While the emergence of these parties is understandable, each of us in this room has a responsibility to alleviate the anger that these parties feed on. To de-bunk many of the false claims they make. And to expose their ‘easy answers’ as populist lies.
And we need to communicate a hopeful message. About how much the EU has done to help its people and businesses recover from the crisis. How we are pulling together. To make the most of the advantages we have. To change what needs to be changed here in Brussels. And that way, take the path towards a much brighter future.
Standard Eurobarometer 79, public opinion in the EU, spring 2013