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European Commission

[Check Against Delivery]

Olli REHN

Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro

Speaking points by Vice-President Olli Rehn at the Press Conference on the Country Specific Recommendations

Press Room, Brussels

Brussels, 2 June 2014

Good afternoon.

I am glad to be back here, although I must admit that I am already going through cold turkey following the intensive electoral campaign. Back to business now, and if you look at Europe in June 2014, Europe is today portrayed both by political discontent and economic recovery. The crisis has certainly left a heavy legacy on our societies and our economies, which is feeding political discontent, but at the same time, in the elections, European oriented, often critical but fundamentally constructive political parties gained a majority in the new European Parliament. The Commission's task is to present credible, realistic and realisable policy initiatives, and that's what today's recommendations are about. They provide policy recommendations to the EU member states and also to the euro area in its entirety on what is needed to boost sustainable growth, to boost investment, create sustainable jobs and ensure sound public finances.

In this regard, the European economy has come a long way since this time last year, when it was just beginning to emerge from a prolonged recession. Today, the recovery is gradually strengthening, becoming broader based and spreading across countries. Nonetheless, major challenges remain, as President Barroso has just outlined especially concerning the high level of unemployment in member States.

Concerning fiscal policy today we have taken a number of decisions related to the Excessive Deficit Procedure. First and foremost, we are recommending to the Council the closure of the Excessive Deficit Procedure for six member States: Belgium, the Czech Republic, Denmark, The Netherlands, Austria and Slovakia. These countries have all brought their deficits sustainably below 3% of GDP and I want to congratulate them for this achievement.

Let me remind you that in 2011, no less than 24 Member States were still in the Excessive Deficit Procedure. Currently there are 17. And provided the Council adopts today’s recommendations, the number will fall to 11. This shows that the Stability and Growth Pact is working, and Europe’s public finances are being repaired.

In fact if you look at the accumulated fiscal deficit in Europe in 2010 during the crisis it was almost 7%. It has come below 3, and this year we forecast 2.5% on the basis of the draft budgetary plans of the member States Moreover, the level of public debt is stabilising this year and this is of course very important for the credibility of economic policies in Europe.

Comments on certain countries, more related to macro-economic imbalances. First, Spain has made further progress in adjusting its imbalances and the return to growth has reduced risks. Yet major challenges remain, notably the very high unemployment and high domestic and external debt. Completing and fully implementing the reforms of product and services markets, the labour market, taxation and public administration these all remain necessary, along with a timely correction of the excessive deficit.

Slovenia is decisively addressing its excessive economic imbalances, but still faces substantial risks. Further action is needed to correct the excessive deficit and ensure public debt sustainability; to tackle the challenges in the banking and corporate sector; and to improve the management of state-owned enterprises.

Italy is also experiencing excessive macroeconomic imbalances, in view of its high public debt and weak external economic competitiveness. Italy is committed to important reforms. The reform momentum should be intensified so that Italy can create the conditions for a stronger and more durable recovery in growth and job creation. Given Italy's very high public debt, it is important to pursue growth-friendly fiscal consolidation, based on public spending rationalisation and more effective and efficient taxation.

For all three countries experiencing excessive imbalances – Italy, Slovenia and Croatia – we have found that their national reform programmes appropriately address the main challenges we identified in March. That's why we are not proposing to launch the Excessive Imbalances Procedure for these three Member States. We will however monitor very closely the implementation of today’s detailed recommendations, so as to provide the same support for the reform process in these countries, as we have over the past year for Spain and Slovenia, where progress has been very encouraging.

En France, la détérioration de la balance commerciale et de la compétitivité tout au long de cette dernière décennie appelle à une action politique soutenue. Des réformes importantes ont été engagées ces derniers mois par le gouvernement français. Ces reformes vont dans le bon sens et sont cohérentes avec les recommandations émises par le passé: c'est le cas, en particulier, des réformes visant à stimuler l'investissement productif et la création d'emploi. Il est essentiel que la France poursuive avec détermination ces réformes dans les mois qui viennent.

En ce qui concerne les comptes publics, l'intention du gouvernement de réduire principalement le déficit par une plus grande maîtrise des dépenses est la bonne approche. Même si la situation budgétaire n’appelle pas à ce stade de décision relevant de la procédure de déficit excessif, nous demandons au Gouvernement de détailler davantage les mesures qu'il entend prendre pour atteindre l'effort structurel requis en 2015. Nous suivrons attentivement cette question dans le cadre de nos prévisions économiques d'automne et de notre opinion sur l'avant-projet de loi de finances en novembre prochain.

It is also essential that adjustment takes place in a more symmetric fashion in the euro area as we have stated in several documents. That's why are recommending that countries with large current account surpluses, including Germany, take action to boost domestic demand, and in particular domestic investment.

In conclusion, the substantial consolidation efforts of recent years have allowed Europe as a whole to adopt a less restrictive fiscal stance since 2012, and we expect this to continue to be the case over the medium term. This is good news and will help foster the recovery. However, the still high deficits and debt levels in a number of countries mean that fiscal consolidation must continue, to ensure the sustainability of public debt and to create fiscal space for investment.

Equally important, fiscal strategies must become more growth-friendly and focus on expenditure reductions rather than tax increases – as has too often been the case in the past and which is not good for economic growth.

On the expenditure side, more needs to be done to allocate scarce resources to investment in order to foster growth and employment, and strengthen the recovery in Europe.

Finally, before turning to László and Algirdas, let me say one thing based on my recent experience over the last months on a campaign trail, which is very relevant to what Algirdas will say at the end of this press conference. If there is any consistent and cross-cutting message among our citizens across Europe, it is that we must further strengthen and intensify the fight against tax evasion and tax fraud and tackle the practices of aggressive tax planning and tax avoidance seriously. We have done a lot in this regard, both by the European Union and by the Commission, as well as in the context of the G20, for instance internationally, but we need to further intensify working this very important field. It is not only a matter of preventing the loss of tax revenues, to safeguard our public finances, which is obvious, but it is at least as much a matter of social fairness and civic ethics which should underpin our European economic and social moral also in the future.

Thank you.


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