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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 meeting of the Eurogroup
Eurogroup Press Conference
Luxembourg, 19 June 2014
I would like make two points on the IMF’s Article IV consultation on the euro area. I understand Christine will outline the key findings of the Fund in a moment, but I want to underline the reasonable and productive convergence of views between the Commission and the Fund on the outlook and challenges for the euro area.
Concerning fiscal policy, public finances in Europe are now being repaired. I trust that the Council will tomorrow close the Excessive Deficit Procedure for a further six countries, bringing the total down to 11, from 24 in 2011. In other words, at the height of the crisis, we had 24 Member States out of 27 in the Excessive Deficit Procedure. As of tomorrow, I trust we will have 11 out of 28 Member States. The reformed Stability and Growth Pact, in other words, is working and delivering.
What is most important today is the composition of the ongoing fiscal adjustment. There is no way around the need to reduce debt levels, but it matters how we reduce them. We need to focus on rationalising current expenditure while safeguarding growth-enhancing investment. I believe this is entirely possible within the current framework.
Concerning the call for simplification of our fiscal rules, which is part of the Art IV recommendations, I would simply point out that if these rules have become more complex in recent years, this reflects the fact that they have become smarter and more sophisticated. When the rules focused only on the 3% nominal deficit target, they were certainly simpler, but they were also more pro-cyclical, which is not good economic policy. It will be for the next Commission to explore whether there is scope to simplify the rules, but I trust that this would not in any way undo the strong framework for consistent consolidation of public finances that we have put in place, with its counter-cyclical focus on the structural sustainability of public finances over the medium-term.
My second point concerns structural reforms. I fully agree with the IMF's call to make the most of the current benign market environment in order to step up the tempo of reforms for growth and job creation. It is time to further shift the focus of policy from macro to micro: removing bottlenecks to competition in services, reducing the tax burden on labour, and seriously embracing better regulation, negotiating further free trade agreements.
The contribution of the largest euro area Member States to growth in Europe is of particular importance. The greatest service that could be done for balanced growth and employment in the euro area would be for Italy and France to intensify structural reforms and take forward consistent consolidation of public finances, especially in view of their high debt levels; and for Germany to take steps to sustain domestic demand, particularly by boosting public and private investment. These priorities are very much reflected in our country-specific recommendations, which I trust will be endorsed by the Council tomorrow.
I would also like to say I am very pleased that the Eurogroup has given its support for Lithuania to join the euro area as of 1 January 2015.
Lithuania’s readiness to adopt the euro reflects its long-standing pursuit of prudent fiscal policies and serious economic reforms, which have led to a striking increase in Lithuanians' prosperity over the past two decades.
Moreover, Lithuania's firm commitment to joining the euro also shows that the Eurozone remains an attractive community to be a part of.
And Lithuania has proven wrong the doomsayers, who just two years ago were predicting a break-up of the euro. Instead of losing members, the Eurozone is on track to increase its membership from 16 to 19 members, including a Baltic full house of Estonia, Latvia and Lithuania, next year.
This is a reflection of the hard work done to strengthen the euro area over the past four years – and a testimony to the distance the Baltic States have travelled since regaining their independence in the dramatic summer of 1991.
To conclude, since this is not only my last midsummer Eurogroup in Luxembourg, but also my last time representing the Commission here, I would like to thank Jeroen for the his sound leadership of these meetings these past two years. It has been a pleasure to work with you. And the same goes for Christine and Klaus – thank you both for the good cooperation throughout these very challenging years.
And let me end by extending my thanks to all of you, friends in the media, for – how can I put this? – your unwavering support and complete understanding over these past four and a half years. We have certainly had a few late nights together, so I suppose the best conclusion is for me to say simply: good night, and good luck!