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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Remarks by Vice-President Olli Rehn at the Eurogroup press conference
14 November, 2013
The economic situation has not changed dramatically since yesterday, or last week. Yesterday, we presented the Annual Growth Survey, and last week the Autumn Economic Forecast. Nevertheless, today we received the Eurostat flash estimate for GDP for the third quarter of 2013. The flash estimate shows a continuing modest recovery in Europe. To be more precise, in the third quarter of this year, GDP expanded by 0.1% quarter-on-quarter in the euro area and by 0.2% in the EU as a whole. In the previous quarter, GDP had increased by 0.3% in both euro area and the EU as a whole.
Compared to the Autumn Forecast of the Commission, the quarterly growth figures for the euro area and EU, in both cases, are 0.1 percentage points lower than projected in our Autumn Forecast and also lower than market expectations, which were in line with our forecast. Nonetheless, more modest growth was actually expected in the third quarter since the previous quarter's growth figure had, to some extent, resulted from temporary factors in the first and second quarter. The flash estimate showed that there was significantly higher-than-expected growth in our autumn forecast in Latvia: +1.2% instead of 0.2%. For Bulgaria: 0.6% instead of 0.2%. Spain and Estonia resumed growth in the third quarter. In the Netherlands, after flat GDP growth in the second quarter, GDP increased by 0.1%. Growth in Portugal remained in positive territory, confirming the country's exit from recession in the second quarter.
I want to congratulate both Ireland and Spain, the Irish and the Spanish people, for the decisions of today. Ireland's decision to exit the programme without a precautionary credit facility is very important. I know the Irish Government reflected very carefully on this matter. The Commission has always made very clear that this was a decision for Ireland to take and that we would support Ireland, whatever it decided.
Ireland has made very impressive progress and is well placed to make a successful and durable exit from its programme. While challenges remain, Ireland's graduation from the programme will send a very clear signal to markets and international lenders that the adjustment effort undertaken with the support of its European and international partners, has paid off.
It also sends a signal to other programme countries as well, as I heard some Finance Ministers say in the meeting today, and rightly so.
Ireland has accumulated significant cash reserves under the programme, which has been helped by the decision taken this year by European creditors to extend the maturities on loans granted to Ireland. This, and earlier decisions on maturities and interest rates, have made a major contribution to further enhancing prospects for a durable return to the markets.
Determined implementation of a comprehensive reform agenda, combined with European support, has led to a decisive improvement in a country's economic fortunes and put it back on a path of sustainable growth and rising employment.
Today, we have also seen the important decision that Spain will exit its financial sector programme next January, as foreseen.
The programme for Spain has provided a very effective framework for the repair of the Spanish financial sector. As a result of that, Spanish financial markets have stabilised, the liquidity situation of Spanish banks has improved, deposits have been rising and banks have ample access to funding markets. Their solvency position has also remained comfortable. Moreover, the restructuring of banks having received State Aid is well underway, guided by the restructuring plans adopted by the Commission.
The governance, as well as regulatory and supervisory framework of the banking sector in Spain has been significantly strengthened. It will be important to swiftly complete this work by the adoption or implementation of all agreed measures, especially the reform of the governance of the savings banks, which were at the origins of the problems in Spain.
Of course, we know that the situation in the Spanish banking sector still remains fragile. But banks appear to have made adequate provisioning to cushion against any adverse developments. The Bank of Spain's forward-looking exercise, which finished in late October, gives additional comfort as regards capitalisation and shock resilience for the sector at large.
To summarise, the programme for Spain has been successful. The banking sector is much more stable than it was in July 2012, when the programme was launched. It is now essential that the Spanish authorities remain fully committed to continuing and completing the financial-sector repair so as to strengthen the nascent recovery and pave the way for a sustainable improvement in employment.
In short, today has been a good day for both Ireland and Spain. It has been a good day for Europe as well, because it provides clear evidence that the rebalancing of the European economy is indeed progressing.
Europe has supported the Irish and Spanish people in their efforts to emerge from profound crises caused by irresponsible financial practises and insufficiently effective governance, at either national or European level. The shadows cast by those crises still linger unfortunately, as we are painfully aware, which is why it is essential to stay the course of reform at this juncture. Nonetheless, the rules we have put in place since 2010 mean we are in a far better position to ensure that such past mistakes are not repeated in the future.