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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

Speech by Vice-President Olli Rehn at the European Movement Ireland

European Movement Ireland

Brussels, 12 June 2014

Ladies and Gentlemen,

Thank you very much for your very kind invitation and the opportunity to speak to such a large and distinguished audience. I appreciate a lot the work you are doing as the European Movement Ireland and its Brussels branch. Being a former Vice-President of the European Movement in Finland, I know well the high value of NGOs in making the case for Europe.

Our discussion today can be conducted against the background of the economic recovery that is becoming broader-based, even though risks remain. We expect Ireland to grow this year by 1.7%, which is above the 1.2%-growth expected for the euro area and is about the same growth rate as in Germany.

Our economic strategy has been based on two objectives: to strengthen our growth potential and capacity to create jobs, while putting public finances on a more sustainable footing. Where do we stand on these objectives?

First, Europe’s public finances are being repaired. Provided the Council adopts our recommendations of last week, the number of excessive deficits will fall to 11 out of 28 Member States. This demonstrates that the Stability and Growth Pact is working and delivering.

Second, unsustainable current account deficits have been turned around, and progress has been made on structural reforms. Solidarity and solidity went hand in hand. Ireland's successful exit from the programme at the end of last year is highly significant in this regard.

And third, monetary policy remains accommodative. The ECB continues to act decisively within its mandate to deal with the risks of a prolonged period of low inflation and to improve monetary transmission.

In parallel to the firefighting we needed to do over the past years, the architects did their job. The economic governance of the eurozone was profoundly reformed and reinforced, which now provides a solid framework for consistent consolidation of public finances and advancement of economic reforms. The legal framework of financial regulation and supervision has been overhauled and the banking sector is being repaired.

As a consequence, today’s EMU 2.0 is much smarter, sturdier and more persistent to economic and financial shocks than the original. Now the eurozone must focus on the implementation and use of the expanded and reinforced toolbox. That’s in fact what the Commission’s policy recommendations to the EU Member States last week are all about. The European Semester is important for any country that is not in need of a programme. I trust the Council will next week stand behind this concrete reform agenda and endorse our well-grounded recommendations.

The good news is that Member States increasingly regard their economic policies as a matter of common concern – as it should be in a monetary union, and as it is also written in the Treaty. The independent policy advice from the Commission enables Member States to peer-review each other. It is not a one-way street, but a mutual process for all, based on partnership between the Commission and each Member State, where the ownership of reforms by the Member State concerned is of essence.

As the market pressure has significantly eased recently, it is particularly important to maintain the momentum of reforms by determined policy action, based on rules and recommendations. Markets may view us very favourably now, but we know all too well that this can change suddenly and dramatically.

Ladies and Gentlemen,

In this regard, let me express my admiration for the strength and perseverance of the Irish people from the very difficult moments back in 2010. While employment is growing again, the property market has bottomed out and the banking sector is being repaired, I am well aware of the hard choices taken, and of the challenges that remain.

Indeed, generally, at the EU-level and in all Member States, there is no denying that the structural adjustment that Europe is undergoing still calls for difficult choices and strong political will.

The high unemployment in many countries is very worrying for our social cohesion, and can seriously dent our growth potential for some time to come, in particular since the younger generation is the worst hit.

We still have a fragmented financial system where viable businesses, especially SMEs in some countries (and I heard this is also the case in Ireland) find it very hard to obtain financing.

The Banking Union is important to make banks perform better and thus help sustainable growth and investment. But we need to tap alternative sources of funding to finance investment. We have successfully introduced project-bonds. We are working on improving securitisation markets. The new EU budget from 2014 to 2020 will expand the use of financial instruments. The recent ECB decisions go to the same direction to support lending for SMEs.

At the same time, high deficit and debt levels continue to require consistent and sound fiscal policy, in line with the commitments. Consolidation should increasingly focus on the expenditure side, because of growth considerations. More efficient health systems, for example, can both help the budget and improve the quality of health services to the wide public. I can tell you that this point was also underlined by the panellists at the Brussels Economic Forum on Tuesday. Another example for such synergy is the design of efficient innovation systems by improving the quality of public spending. I'd like to invite you to read the Communication that Máire Geoghegan-Quinn and I presented together on Tuesday.

More specifically, this spring's European Semester marks Ireland's first full participation in this EU-wide economic policy exercise and it received seven country-specific recommendations. The first one was on the public finances, reflecting the fact that both the deficit and the debt are still far too high and will require further effort to bring down. In the financial sector, efforts by the domestic banks to address the stock of non-performing loans are now well underway, but must be continued, while structural reforms are still outstanding in the delivery of legal services, labour market policy and the health sector.

Ladies and Gentlemen,

In the coming years we must continue our work on deepening the economic and monetary union. The Community method must remain the cornerstone of this process; Irish and Finns do not need convincing about that. But we are also aware that this process of further deepening will need time, leadership and wide legitimacy among citizens.

In the meantime, what we need is realistic reformism. We need sustained efforts both in the EU and in the member states to open up opportunities for growth and jobs, to the benefit of all our citizens.

We must build the kind of Europe that opens up chances for our citizens to innovate and create new businesses and jobs. A Europe that combines entrepreneurial drive and a stability culture. A Europe where citizens and businesses can benefit from a genuine single market. A Europe that guarantees civil rights in the digital age.

The EU is the global leader when it comes to fighting climate change. By being both resource-efficient and cost-efficient, we should turn it into a competitive advantage that delivers not only technological innovation but also growth and jobs.

The same goes for digital services and e-commerce. Businesses, especially SMEs, must be able to make their digital services available to all 500 million European consumers without artificial barriers.

From firefighting to stabilisation, from recovery to structural reform: that has been the changing focus of European economic policy over the past four years. Let us continue with the wave of reforms underway to remove long-standing obstacles to growth and employment. Let us continue moving from "macro" to "micro", in order to foster the necessary structural change to reap the opportunities from global trade.

We must continue reforming the European economic and social model. Not nostalgically clinging to the status quo, since that would only lead to a permanent economic decline of Europe. Not dismantling the European model, because we believe in the combination of stability culture, entrepreneurial drive and social justice.

But instead, genuinely reforming and modernising the social market economy, for the sake of sustainable growth and job creation.

Thank you very much.


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