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European Commission

Olli REHN

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

Brussels

22 November, 2013

Today's meeting marked another significant milestone in the deepening of economic governance in the euro area. Even three years ago, few would have given credence to the idea that finance ministers would come together to exchange views and have a serious and substantive, action-oriented discussions on their draft budgetary plans, on the basis of opinions issued by the Commission. And yet, here we are today.

I want to thank Jeroen and the Eurogroup for taking this major step today and having these very serious discussions and poviding political guidance from the Eurogroup, which is broadly supportive of the Commission's analysis.

This exercise has brought a new level of transparency to budgetary policy in the euro area, fostering an open debate on budgetary plans and facilitating scrutiny by national stakeholders and euro area peers.

The overall picture emerging from our analysis of the 13 budgetary plans shows that the large consolidation effort implemented in recent years is now bearing fruit as regards public finances. This can be seen in the fact that debt in the euro area will stabilise in 2014. Moreover, the pace of consolidation is set to slow down further, so that the average change in the structural balance next year will be of one quarter of a percentage point of GDP.

You may recall that last year, 2012, the average change in the structural balance was worth one half of a percentage point of GDP. This year it is going to be around three quarters of a percentage point of GDP and as said next year around one quarter of a percentage point of GDP at the same time as debt is stabilising.

Overall, the draft budgetary plans are broadly consistent with our forecast. We have seen much less tendency than in the past for over- optimistic projections, which was a major bad habit in Member States. This is an important improvement which contributes to the consistency and credibility of fiscal policy.

It is also essential that progress on structural reforms be stepped up. The Commission has assessed the plans for structural reforms with a budgetary impact – the Economic Partnership Programmes – submitted by France, the Netherlands, Malta, Slovenia and Spain. Substantial reforms are underway or planned to pension and health systems, and there is progress on improving national fiscal frameworks. Yet results are more mixed when it comes to tax reforms. Overall, there is a need to step up structural reform to boost sustainable growth and job creation. This is an essential, and no less important, complement to fiscal consolidation, as the European Commission has consistently stressed, and we will continue to stress this very important fact.

As regards specific cases, you will recall that the Commission assessed the plans according to a classification ranging from serious non-compliance to compliant.

The fact that none of the draft budgetary plans assessed were considered non-compliant is important. It shows that all Member States concerned are taking seriously their commitments to sound public finances, which we saw today in the meeting where we had very substantive and serious discussions on many budgetary plans;

I do not repeat all what Jeroen Dijsselbloem said and that you can read from the euro area statement but I would just say that three countries, France, the Netherlands and Slovenia, were considered compliant but with no margin, and as such were invited to ensure that their budgets are implemented rigorously to avoid risks of non-compliance. In the case of France, given its importance as the second economy of the euro area, I very much hope that next year will also see an acceleration of economic reforms to lift sustainable growth and job creation, because that is what the French people are expecting.

The three countries considered broadly compliant – Belgium, Austria and Slovakia – are each required to correct their excessive deficits this year. I am pleased that Belgium, for which the Excessive Deficit Procedure had to be stepped up six months ago, now looks to be on track for a sustainable correction, as does Austria. For Slovakia, on the other hand, a sustainable correction looks not yet assured.

Finally, five countries have been considered "at risk of non-compliance" – these are Finland, Italy and Luxembourg, which are in the preventive arm of the Stability and Growth Pact, and Spain and Malta, with ongoing Excessive Deficit Procedures. For Finland, both the Commission and the government expect the 60% debt threshold to be breached next year. While we do not yet see the need for an Excessive Deficit Procedure to be launched, this trend is clearly worrying. The Commission will need to monitor this situation closely and will probably return to the matter when we present our Winter Forecast.

In the meantime, I draw your attention to the statement of today where the Eurogroup invites those Member States whose plans are at risk of non-compliance, to address the risk and against that background, the Eurogroup takes note of additional measures which will be announced shortly in the case of Finland.

Regarding Italy too, the principal concern relates to the debt benchmark, since compliance in 2014 is at risk, according to our analysis of the Draft Budgetary Plan. I am aware of the recent announcements by the Government regarding privatisations and I look forward to receiving further details of these, and especially, of how the spending review underway could deliver savings already in 2014. Provided these measures are substantiated and formalised in the coming weeks, we would be able to take them into account when preparing our Winter Forecast, which is going to be the next checkpoint of the fiscal policy of the Euro area Member States.

Thank you.


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