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European Commission - Speech - [Check Against Delivery]

Remarks by Vice-President Dombrovskis at the European Semester Autumn Package press conference

Brussels, 21 November 2018

Good afternoon, Ladies and Gentlemen,

We will dive into the details on the European Semester shortly, but before that let me present other points, which were on today's Commission agenda.

We started today with a presentation of our chief negotiator, Michel Barnier, on the latest developments as regards Article 50 negotiations.

As he himself already presented it to you, I will not go into further detail.

The European Council Article 50 format is set to meet on Sunday, as you know.

And for that we will need to have agreed beforehand on the political declaration on the future relationship, and we are not there yet.

Sherpas are due to meet on Friday. Of course they will need to see a final text before then.

And the Commission stands ready to consider the text and take any action at any time. 

Three Communications have also being up for discussion.

One of them is taking stock of the achievements of the investment plan for Europe, also known as the Juncker investment plan.

Another one is a Communication assessing the functioning of the Single Market, which is our best asset in a changing world. It looks at the main barriers and opportunities for further integration, especially in view of the proposals the Juncker Commission has already put on the table.

Both of them, as well as a new action plan for standardization will be presented to you tomorrow by our colleagues, Vice-President Katainen and Commissioner Bieńkowska.

We also adopted a set of new in-house measures to improve the Commission's internal governance with immediate effect.

There are five documents, which cover amongst others the clarification of the mandate for our corporate management board and the simplification of our IT governance landscape within the Commission, setting us on the path to become a user-focused and data-driven administration by 2022. 

But now let me move to European Semester.

Europe's economy is entering its sixth year of uninterrupted growth. There are more people at work than ever before. Investment is growing at nearly 4%, consumer demand and public finances are all improving.

But differences among countries still persist.

In particular, for countries that have implemented ambitious structural reforms, we see high growth.

In some other countries, however, the legacy of the crisis is still visible, and important reforms are still outstanding.

When setting the economic and social priorities of the European Union for the year 2019, we need to take into consideration the new context.

There are good times, but we cannot ignore the rising risks and global uncertainty.

The current economic momentum offers a window of opportunity that will not stay open forever. So we must be prepared.

At the EU level, it is time to decide on the further strengthening of our Economic and Monetary Union.

The euro is widely supported by people. Yesterday's Eurobarometer survey reveals that 74% of citizens of the euro area are saying that having the euro is a good thing for the EU as a whole. This should encourage us to complete the Economic and Monetary Union and to foster the international role of the euro.

At national level, we invite countries to renew their reform efforts and carry-out well-targeted investments. Member States must use the good times to reduce debt where it is high and to rebuild fiscal buffers. Creating buffers will help countries to weather future shocks. 

Ultimately, productivity growth is what allows increased wages without losing competitiveness. We need to invest more in technology, as well as in skills and education. Already today, 40% of EU employers report difficulties in recruiting people with the right skills. Marianne will speak more on this.

The Commission also adopted the euro area recommendations on which Pierre will elaborate.

Ladies and gentlemen,

Today, we furthermore adopted a fiscal package of opinions on Draft Budgetary Plans and decisions under the Stability and Growth Pact.

This year and next, no euro area country is forecast to have a deficit above the 3% of GDP reference value. And this is the first time since the introduction of the euro.

Ten euro area Member States are expected to have a budget surplus in 2019. These are good news.

Let me also congratulate Greece, which has submitted its draft budgetary plan for the first time within the European Semester process, and is assessed as compliant with the Stability and Growth Pact.

Continued adherence to post-programme fiscal targets as well as to the agreed reforms is important to build confidence in the Greek economy in a view of returning to markets.

We have adopted the first enhanced surveillance report on Greece. And Pierre will also present it in more detail.

All in all we have 10 euro area Member States compliant with the Stability and Growth Pact, so besides Greece those are Austria, Cyprus, Finland, Germany, Ireland, Lithuania, Luxembourg, Malta, and the Netherlands. This means 10 compliant countries in comparison to 6 in previous years.

Three other euro area countries are found to be broadly compliant: Estonia, Latvia and Slovakia.

And five Member States are at risk of non-compliance: Belgium, France, Portugal, Slovenia and Spain. We ask those 5 Member States to take the necessary measures within the national budgetary process to ensure that the 2019 budget will be compliant with the Pact.

Let me turn to the case of Italy.

On 13 July, the Council recommended to Italy to reduce its structural deficit by 0.6 % of GDP in 2019.

As for the revised Draft Budgetary Plan, our analysis shows that Italy's structural deficit would see an increase by about 1% of GDP next year. These numbers speak for themselves.

So it is with regret, that today we confirm our assessment that Italy's draft budgetary plan is in particularly serious non-compliance with the Council recommendation of 13 July.

As a consequence, we also re-examined Italy's compliance with the debt-reduction requirements.

And our analysis – our Article 126.3 report - shows that the debt criterion should be considered as not complied with.

We conclude that the opening of a debt-based Excessive Deficit Procedure is thus warranted.

Let me stress that the situation in Italy is of common concern: Euro area countries are on the same team and playing by the same rules.

These rules are there to protect us. They provide certainty, stability and mutual trust.

In a situation of very high debt, Italy is essentially planning significant additional borrowing, instead of the necessary fiscal prudence.

Let me also say that the impact of this budget on growth is likely to be negative in our view.

It does not contain significant measures to boost potential growth. And, the uncertainty and the rising interest rates are taking their toll on Italian economy.

Also it hinders the ability of Italian banks to lend to Italian companies and households at affordable costs.

In the past years, Italy has made progress in stabilizing its economy and returning to growth and job creation.

Today's growing uncertainty risks to undermine this progress.

High levels of debt keep the economy vulnerable to shocks. Italy's debt is forecast to remain at around 131% over the next two years. This is an average debt burden of 37 000 €, and in debt servicing costs 1000 € per inhabitant every year!

I can't see how perpetuating this vulnerability would increase economic sovereignty. Instead, I believe it could result actually in more austerity down the road.

With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability.

I hope this risk is to be avoided. Because in the end, what is at stake is the well-being and future prosperity of the Italian people.

Our job is to flag risks before it is too late. And this is what the Commission has been doing over the past weeks, and what we are doing again today.

So we stand ready for a dialogue with the Italian authorities, but we think that this situation needs to be addressed.

Thank you.

SPEECH/18/6508

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