European Commission : Brussels, 30 January 2013 Address by President of the European Council Herman Van Rompuy at the concluding plenary session of the European parliamentary week on the European Semester for economic policy coordination

EUROPEAN COUNCIL THE PRESIDENT		EN

Brussels, 30 January 2013

EUCO 32/13

PRESSE 40 PR PCE 26

Address by President of the European Council Herman Van Rompuy at the concluding plenary session of the European parliamentary week on the European Semester for economic policy coordination

It is an honour to come to this important event and I am delighted, not least as a former President of a national parliament, to have this opportunity to meet with you at the beginning of this new year.

2013 has started on a more hopeful note for the euro area, as a euro area. It is now clear that the euro is an irreversible project. There are several signs that the worst is now behind us. In most countries, even those under pressure from the markets - from Greece to Portugal, from Ireland to Italy to Spain - budgetary positions are looking healthier, exports are picking up, on the financial side, spreads are coming down, and financial fragmentation within the euro area is easing.

These are all helpful signs, but we should not forget that there is still a long, long way to go. After all, we are in the process of overcoming the biggest economic downturn since the 1930s, which in Europe included an existential crisis for euro. A crisis that made people fear for their savings, then fuelled some doubts about the survival of their currency itself. What could be more damaging to confidence, in households and businesses alike?

I would like to underline the importance of this point. The stabilisation of the euro area was our priority for these last three years for a very simple reason: without stability, there could be no growth, and no job creation.

From that perspective, 2012 will come to be seen as a turning-point. A vast amount of work was done in the Member States, in the euro area, and in the Union as a whole. Only once the dust has settled will people fully appreciate how far we have come.

Two guiding principles have informed all the decisions we have taken: greater responsibility and greater solidarity. The two are inseparable.

Greater responsibility for national governments, particularly in the conclusion of the Treaty on Stability, Coordination and Governance (the so-called "fiscal compact treaty"), which entered into force just at the beginning of this month, and in the courageous implementation of structural reforms that are as tough as they are necessary.And greater solidarity, particularly with the establishment of a permanent rescue fund, the European Stability Mechanism, to protect our economies from large-scale economic or financial shocks.

Together with a stronger Economic and Monetary Union, with progress on economic coordination and on banking union, these steps have made a substantial contribution to restoring confidence in the resilience and integrity of the euro area.

We have moved forward under pressure from the financial markets, but even without that pressure, these reforms would have been inevitable, one way or another. With or without the euro, structural reforms would have become necessary sooner or later. Not just because of market pressure -- markets are not always be rational -- but because there are objective factors that we cannot ignore: debt sustainability, competitiveness, demographic change, and so forth. It is simply not possible to accumulate successive double-digit deficits in a country's budget, or current account on the balance of payments, and not suffer any consequences - that amounts to putting people's future in hock! Had we reacted in good time, ten years ago, we could have avoided much difficulty and suffering. I am aware of the colossal strain of adjustment. But the efforts are beginning to show results. The situation is improving -- though I hardly dare use that word!

Our challenge now is that, while the return to stability and confidence is essential to the recovery, there is always a time-lag between the return of stability and the resumption of growth. And that is followed by a second time-lag: between the resumption of economic growth and improvements in employment.

Dear colleagues, we must focus all our efforts on shortening those time-lags! In other words, speeding up the recovery and speeding up the rebound in employment. We must examine all ideas and proposals to that end and implement all those that are feasible. Simply waiting for the recovery to bring them down without further effort is not enough. Special measures and programmes are needed. We made a start at European level with the Compact for Growth & Jobs adopted by the June European Council. Many Member States have taken extra measures at national level.

In general, we need more structural economic growth -- beyond growth recovery in the short term. Raising our competitiveness is key in this. Our competitiveness is under constant pressure. And not just from emerging powers such as China. The United States, for example, is witnessing a spectacular reduction in energy costs thanks to new discoveries, and is effectively on the verge of reindustrialisation. That is why we must continue to work untiringly on the core drivers of our competitiveness, using the tools we have put in place over the last few years. But we must ensure that the load is shared as fairly and equitably as possible, and preserve social cohesion.

Of course, the ultimate goal of our stabilisation efforts is employment and growth and therefore in itself social. But we must never lose sight of the specific social dimension of our policies. In this context I would like to draw attention to the fact that the December European Council asked me, in collaboration with the President of the Commission, to come up with specific proposals regarding the social dimension of our Economic and Monetary Union.

While we work together to rebuild growth and employment, the European Union and particularly the euro area are also involved in another large-scale project that is closely linked to those efforts. It is a longer-term project, but its impact is already being felt. I am, of course, talking about strengthening our Economic and Monetary Union.

The crisis has reminded us, in the clearest possible terms, that having a genuine economic union involves far more than merely sharing the same currency. To resolve the problems behind the current difficulties, we need closer alignment of our financial frameworks and our economic and fiscal policies.

This project, launched in June, and marked by my three successive reports to the European Council [for the sake of convenience, these were all called "Towards a Genuine EMU" ! ] , is making determined progress, step by step. The plans for banking union, which will enable us to assess the risks of bank failures better and reduce the cost to Europe's taxpayers, through the Single Supervisory Mechanism and a common resolution mechanism, have already reached an advanced stage. In December, at the last European Council meeting, we also agreed to explore ways of coordinating our economic and fiscal policies even more closely, for example through ex-ante coordination of major economic measures in Our Member States and through contracts between Member States and the EU on structural reform measures.

Indeed, the biggest lesson we have learned over the past years is the degree to which, whether we like it or not, we are all interdependent. Economic decisions of one Member State have an enormous impact on the fortunes of other Member States. Within the Euro area, risky economic behaviour -- by governments, banks or others -- in any part can jeopardize the stability of the whole.

The challenge we all face is how to jointly manage that interdependence and assume our co-responsibility. We want to preserve as much as possible the ability of Member States to make their societal choices, whilst having the level of joint policy making necessary for the common good.

That is why meetings such as this one are of particular importance. Bringing into a common discussion the national sensitivities of each, together with a sense of common purpose engendered by working together, is fundamental to what we need to do.

And I am also acutely aware of the need to ensure that all our procedures are democratically accountable -- and visibly so. In this, the role of parliaments is vital. The European Parliament and national parliaments are not rivals -- they are two sides of the same coin. While each have responsibilities at their own level -- which will be reinforced -- cooperation between the two levels, expressly foreseen in Article 9 of Protocol No 1 attached to the Lisbon Treaty and in Article 13 of the Fiscal Stability Treaty, is also important.

For my part -- and I'm sure that is the same for the President of the European Commission -- I stand ready to cooperate with you as you establish your new procedures and mechanisms, or reinforce existing ones, to ensure the highest standards of transparency, accountability and parliamentary scrutiny in our deepened Economic and Monetary Union.

Dear colleagues, all this is even more important if the markets are calmer, because then it will be institutions that will have to maintain the pressure for economic and social reforms and for growth and employment. The European Semester is a key instrument in maintaining this pressure. In this, your role in this is vital!