Sefcovic Speaks About Tackling Eurozone Crisis

Bratislava was host yesterday to the conference Shaping a Genuine Economic and Monetary Union, organised by the European Affairs Centre, the Bruegel think tank in Brussels and the Financial Policy Institute at the Ministry of Finance SR, which focused on the search for solutions to the ongoing eurozone crisis.

At the event, Vice President of the Commission, Maroš Šefčovič, gave a speech on his vision of the eurozone’s future. Here is a full transcript of his speech in English.

‘Confronting the crisis: New vision for Europe’

Shaping a Genuine Economic and Monetary Union

Ladies and gentlemen

I’ve been asked today to talk about a new vision for Europe. But any new vision needs to be based on a clear understanding of the past, so if you’ll permit me, I’d like to start by looking not forwards but backwards.

The economic tribulations of the past few years have posed perhaps the greatest threat to European unity for the last 60 years.

The EU’s Lisbon Strategy, agreed in 2000, intended to make the European Union the world’s most competitive economy by 2010.

Maros Sevcovic - photo Pavol Freso

Instead, by the end of that decade, Europe was faced with spiralling debts, rising unemployment, stagnating growth and, worst of all, an apparent inability to act decisively.

Public support for the EU and citizens’ confidence in the ability of their political leaders was at an all-time low. This is clearly reflected in the sheer number of changes in government: no fewer than 17 EU countries have seen a change of head of state or government since 2010 as citizens chose to voice their concerns through their votes.

The problems caused by the crisis were common to all European countries, but the solutions to them were not. Each Member States ought to get its own house in order without consideration for the other 26.

Each country took a different approach, with different measures designed to bring down public debt levels and revitalise the economy. Some of these measures were effective – but many were not.

And none of them were coordinated, which meant that they only tackled part of the problem, the symptoms and not the cause.

It took the very real risk of the Greek crisis contaminating the whole Eurozone to make it clearer than ever that EU economies – not just the Eurozone economies but all 27 – were far more deeply interconnected than had been realised.

Tackling the root causes of the crisis needed a more coordinated approach. A European approach that reflected the European nature of the crisis.

And so finally, belatedly perhaps, in 2010 the EU moved into action.

Over the course of the last two years, the piecemeal approach of 27 different governments has gradually given way to a coordinated strategy aimed at tackling the Europe-wide issues of economic governance and budgetary discipline that were at the root of the crisis.

A coordinated strategy, I might add, that would have been unthinkable just a few years before.

In a little over two years, we have put in place a number of measures designed specifically to curb excessive public deficits, forcing Member States to stick more rigorously to the rules and introducing the threat of sanctions for those that don’t (in Brussels jargon, these are called the fiscal compact and the six-pack); and we’ve also introduced the European Stability Mechanism, a €500bn firewall to break the link between banks and sovereign debts.

And, with the most recent agreement on a single supervisory mechanism for all of Europe’s banks, we have sown the first seeds of a fully-fledged banking union.

Of course, I’m not suggesting that we are out of the trees just yet. True, the mood is rather more optimistic than it was twelve or eighteen months ago, with the first signs of a tentative recovery this year, consolidating, we hope, in 2014.

And the latest economic sentiment indicators show that confidence is indeed growing in most sectors of the EU economy. In particular, consumer confidence is rising in both the EU as a whole and in the Euro area as pessimism about the future general economic situation and unemployment trends continues to diminish – a clear indication that our efforts are already bearing fruit.

Which brings me to the future, to the ‘new vision’ for Europe.

As I said, while our combined efforts to improve the EU’s economic governance, protect and strengthen the financial system, tighten up the budgetary procedure have started to bear fruit, we cannot afford to rest on our laurels.

All that we have achieved in the last two years or so, all the hardship that European citizens have faced, all the political and economic prices we have paid: this is just the start of the process.

We have sown the seeds of the real change that needs to come – now it is up to us to nurture those seeds, to help them grow and blossom into a fully-fledged economic, fiscal and political union.

Based on the Commission’s Blueprint published last November, we believe that it could be possible to achieve full economic and monetary union within the next five to ten years.

It will not be an easy task, and will require even greater commitment from the Member States to become a reality.

But it is a real possibility – some might even say a necessity if we are to consolidate the good work we have already done.

And we can start immediately.

We believe immediate priority should be given to implementing and enforcing the measures we have already agreed on economic governance (such as the six-pack I mentioned earlier), as well as the rapid adoption of the current Commission proposals such as the Single Supervisory Mechanism for banks.

These can all be achieved within the next few months, if the willingness is there. I am glad to say that our discussions with the current Irish Presidency of the EU suggest that there is indeed a desire to move ahead rapidly in many of these areas.

But this is just the start of what will need to be done in the future if we are to achieve a genuine EMU.

The Commission’s Blueprint sets out some of the other future challenges:

The creation of an instrument to help Member States implement structural reforms that have a negative short-term impact and a high political and economic cost

The creation of a Single Resolution Mechanism to deal with banks in difficulties.

The creation of a new European right for a closer examination of national budgets.

The creation of a European Redemption Fund as a means of reducing public debt significantly exceeding the criteria set out in the Stability and Growth Pact.

The creation of euro bills as a means of fostering further integration of euro area financial markets.

The creation of a proper fiscal capacity for the EMU.

The creation of Eurobonds to allow the common issuance of public debt based on that common fiscal capacity.

Some of these proposals will require Treaty changes, all will require a high level of commitment from Member States.

As I said before, this will perhaps be the biggest challenge to Europe’s commitment to a ‘new vision’, not least because it will involve Member States being ready to pool large parts of their national sovereignty in such a key area as economic and budgetary control.

That’s why we need a firm political commitment to this new vision. With euro scepticism on the rise in many countries, and the threat of referenda hanging over every major transfer of sovereignty, it has never been more important to ensure that all our decisions are taken in complete transparency and, vitally, with the requisite level of parliamentary oversight – both national and European.

If the aim of EMU is to create a new vision of ‘more Europe’, where national interests are pooled in the name of the greater good, then we have to ensure that we do not inadvertently bring about ‘less Europe’ by seeming to be become less democratic and less accountable.

The creation of a genuine EMU is about getting the EU economy back on track and protecting it from future shocks.

But this is only part of the picture.

For the economy to grow again, for Europe to once again be a source of economic prosperity and jobs, then we need to be competitive.

As I said at the beginning, the Lisbon Strategy had optimistically predicted that Europe would be the world’s most competitive economy by 2010.

We all know how that worked out!

But this does not mean that the EU has given up on competitiveness – far from it.

Getting the EU economy back on track is about more than sorting out the governance issues, however.

We need to tackle competitiveness as well, and to do this we need to exploit what for many is the EU’s greatest asset – the Single Market.

With its customer base of some 500m people, the Single Market clearly has the potential to be the principle driver of jobs and economic growth in the EU.

Indeed, between 1992 and 2008 the Single Market generated 2.77 million extra jobs in the EU and an additional 2.13% in GDP.

And yet barriers remain to the creation of a true Single Market, and in many of the areas with the greatest growth potential, such as services, energy and the digital economy, for example.

Completing the Single Market, giving Europe’s businesses and consumers unfettered access to such a powerful tool, must be another core element of our new vision.

Talking of money, any new vision for Europe must of course be more than simply words – it has to be backed by the necessary investment. At the European level, the principle investment tool is the EU budget.

It has to be: we cannot put in place the policies that we believe will create growth and jobs without a clear understanding of how much they will cost!

That is why the Commission’s proposal for the next multi-annual financial framework or MFF – Europe’s budget for 2014-2020 – was so ambitious. It was what we believed – and indeed still do believe –necessary for Europe’s new vision to become a reality.

As you can imagine, the Commission is obviously disappointed that the February European Council’s agreement on the budget was less than we had hoped for. But we recognise that it was the best deal that we were going to get, given the political stakes in many Member States.

Of course, it still is an important investment tool – it is simply the fact that the €960bn agreed by the heads of state and government will not go as far or be as effective as the €1.03tn we had originally proposed or indeed the €992bn in the current budget period.

I’m glad to say that most of the key areas for growth and jobs proposed by the Commission were maintained in the budget agreement, even if in some cases with reduced funding.

I might mention the new €6 billion Youth Employment Initiative, as well as increased funds for research and innovation through the Horizon 2020 programme and for mobility through the Erasmus for all scheme. COSME, a new special programme for small and medium-sized enterprises (SMEs), was also endorsed by the European Council.

And there was also good news for Slovakia, I’m happy to say, which emerged as one the Member States to benefit the most from the new MFF! A testament, I might add, to the constructive dialogue and strong pro-European approach of the government during the negotiations.

The European Parliament, of course, still has to have its word on the budget. This is the first time that MEPs will have their say on the MFF after changes introduced in the Lisbon Treaty, and it is important for the democratic accountability and legitimacy of the EU that they are part of this process.

It is clear that negotiations with Parliament will not be easy – the EP President Martin Schulz has made it clear that he cannot agree to the budget deal as it currently stands – and we can perhaps expect some proposals for changes in certain areas from MEPs.

But the European Council clearly understood the need to get the European Parliament on side, agreeing in advance to several key demands from MEP, such as the ability to roll over unspent funding from one year to the next or between budget headings, or a mid-term review of budget spending.

So while the final figure is not yet known for certain, it is clear that if we are to do more for Europe over the next seven years, then we will have to do it with less.

It will be a challenge to do what needs to be done with a budget of this size – but it will not be impossible. It will force us to work more efficiently and effectively, and that is never a bad thing.

And while we will continue to push ahead with our new vision for Europe, we will have to focus on the most urgent priorities, where EU funding can bring real added-value and real benefits to citizens in the immediate future.

I hope today that I’ve been able to give you a flavour of how the EU’s new vision might – and I hope will – become a reality.

But I wanted also to briefly talk about a different vision: the vision of a two-speed EU.

There are some that see a two-speed Europe as inevitable, a natural progression of the current status quo, with the Eurozone countries having to develop at a different pace than the rest.

But there are others who see a two-speed Europe as synonymous with ‘Europe a la carte’, where Member States are free to pick and choose their level of commitment and integration – something that risks fatally undermining the very essence of a unified Europe by creating a second tier of nations deemed unwilling or incapable of moving as fast as the rest.

I think the reality will be a combination of the two.

In order to grow, the Eurozone will have to become more deeply integrated – but this does not mean that those countries left outside the Eurozone will somehow be moving at a different pace, or that they should be considered as somehow ‘second class’.

Indeed, we have made it clear that deeper integration of the Eurozone must not exclude the others: the door must be left open for anyone to join in with that integration if they wish.

Remember, all but two Member States have a legal obligation to join the euro, and will have to commit to the deeper integration in the future in any case: excluding them now would be illogical.

But it is more than simply a question of legal obligation:

if there is one thing that I hope to have shown you today, it is that the future of the EU is interconnected, that what happens in one Member State has repercussions in all the others. So it is inevitable that deeper integration in the Eurozone will affect all Member States – they will all develop together, not at different speeds but rather in parallel.

Ladies and gentlemen

I’ve talked about the measures we believe are necessary for the ‘new vision’ for Europe, but I wanted to finish with a quick look at what the end results might be.

What might Europe look like in 2050, I wonder?

Well, for starters, economic crises such as the one we are currently experiencing will be a thing of the past. Europe’s 30 Member States – all using the same currency – will have some of the healthiest public finances in the world, rarely living beyond their means and never acting irresponsibly in their spending so as to harm any of their fellow Europeans.

Europe’s 600m citizens will benefit from some of the most comprehensive and effective rights in the world: the right to live, study, work, retire wherever they want; access to low cost modern technology; a Europe-wide network of transport links that is cheap and efficient to run; access to businesses and services from the length and breadth of the continent; protection at work, at home, on the road.

By 2050, Europe will have consolidated its position as the biggest trading bloc in the world. Free trade agreements with Canada, the US, India and Japan will have given a major boost to the European economy: on average, each additional €1 billion of exports supports 15,000 additional jobs across the EU.

Europe will be the world’s leading advocate of the fight against climate change, the most fervent defender of human rights, the world’s largest aid donor, the best promoter of social justice.

In fact, I have no need to look to 2050 to see this vision of Europe. A lot of it already exists – and we are well on the way towards achieving much of the rest of it well before the middle of the century.

Today’s Europe, for all its trials and tribulations, is a shining example of what can be achieved through collective political will. To an observer in 1940, in the middle of the worst conflict this continent has ever seen, today’s Europe would have seemed just as much of a utopia as the one I have just proposed.

Indeed, to most people here in Slovakia as recently as just 25 years ago, it would have seemed an impossible dream.

In the midst of this crisis – not only of the economy but also confidence – let’s not forget what we have already achieved, the odds we have already overcome.

Yes, we need a new vision for Europe, but let’s not forget that we will build it on the many achievements of Europe’s past.

Thank you for your attention.


1 Comment

  1. Tisk…… is simply the fact that the €960bn agreed by the heads of state and government will not go as far or be as effective as the €1.03tn we had originally proposed or indeed the €992bn in the current budget period said Maroš Šefčovič as he slurped his Caviar fingers and whacked down his third glass of vintage Chateau Latour Pauillac 1990 …….

    These guys are unreal, they wanted over a Trillion Euro and yet they claim Europe was faced with spiraling debts, rising unemployment, stagnating growth and, worst of all, an apparent inability to act decisively……

    Worth every penny eh ?

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