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Tuesday, 10 October 2017

EU Commission: Remarks by Vice-President Dombrovskis at the ECOFIN press conference in Luxembourg

Remarks by Vice-President Dombrovskis at the ECOFIN press conference in Luxembourg

European Commission - Speech - [Check Against Delivery] Brussels, 10 October 2017 Thank you, Toomas and our media representatives. First of all, I would like to welcome the Council Conclusions on Climate Finance. As you know, the EU has pledged to lead the way in implementation the Paris Climate agreement...

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Address by President Donald Tusk to the European Committee of the Regions

It is a real honour and pleasure to be here again at the Committee of the Regions. As I said during my last visit here, I am a true believer in the mission of this institution. Your members are important ambassadors for Europe to the political grassroots, closest to ordinary citizens, and your fingerspitzengefühl for the concerns of local communities helps to keep European policy-making firmly rooted in reality. Europe's self-confidence and well-being depend on the vitality of our cities, regions and municipalities, which is reflected in the Committee's agenda during this Week of Regions and Cities.

We last met 18 months ago, and much has happened since then. At the time, the European Council was working hard to end the most serious migration crisis Europe has ever faced, and also to prevent the exit of one of our largest Member States. As regards the first issue, we have been able to achieve a lot. By ordering the closure of the Western Balkan route and improving our cooperation with Turkey, the flows of irregular migrants on this path to Europe were stemmed by 98 per cent. However, on the second issue, we have unfortunately not been as successful. On June 23, Britain voted for Brexit. Immediately after the result, I told the media what my father used to tell me: "what doesn't kill you, makes you stronger." Thankfully, this is what has happened. But it did not happen automatically, it took much effort.

Britain's referendum campaign was full of false arguments and unacceptable generalisations. But it would have been a big mistake to interpret the negative result exclusively as a symptom of British exceptionalism and Euroscepticism, because all over Europe, even moderate voters were asking "Is the European Union the answer to problems of instability and insecurity, or is it now standing in the way?" To find a clear answer to this question, at my invitation, the leaders met as a community of 27 in Bratislava in September 2016. The result was the Bratislava Roadmap, which was a set of specific, realistic commitments, carefully tailored to voters' real concerns. On migration, security, the economy and climate. More than this, we needed to move to close the gap between discussing issues and delivering results. Leaders agreed that momentum must be clear on all issues by the 60th anniversary celebrations of the Treaties of Rome in March, with a number of strict deadlines set for key legislation.

The progress we have made since Bratislava didn't come easily. To the contrary, each achievement was a tough battle on the way to restoring public confidence. Let me give some of the most important examples. In the first place, leaders promised never again to allow a return to the uncontrolled migration flows of 2015. As a result, the new European Border and Coast Guard was declared operational in December last year, and help was given to Greece, where over 1,000 European border guards are present. In addition, we have started providing financial assistance to refugees in Turkey. Likewise, earlier this year, after leaders agreed to close the Central Mediterranean route, our effort to train and equip the Libyan coastguard has led to a sharp drop in arrivals to Italy.

On climate: the entry into force in November 2016 of the Paris Climate Change Agreement thanks to EU efforts was a significant boost to our morale. More importantly, it also demonstrated Europe's continued leadership on the global stage. We have been clear since then, also to the new US administration, that the agreement must be implemented and cannot be renegotiated. The EU is now working to fulfil the commitments from Paris, both internally and globally, together with key countries such as India and China.

Europe continues to be a global leader in free and fair trade. A month after Bratislava, we signed the CETA agreement with Canada, and in July this year, a political agreement on an EU-Japan free trade deal. In doing so, we kept our promise to the public at Bratislava to give Europe the power to defend our citizens from unfair trading practices. As you know, new robust trade defence instruments were agreed last week, after months of tough debate. While our ambitious programme of trade expansion continues, we will not hesitate to use these new tools against trade hooligans.

Security was also, rightly, one of citizens' major concerns. We live in an increasingly unstable world, where terrorism, geo-political tension and cyber-attacks threaten our safety and interests on a daily basis. While the European Union's contribution to peace, conflict resolution and humanitarian efforts is globally recognised, we cannot ignore the continued presence of hard power in the world and, indeed, around our own borders. This is why Europe must be even more united, capable of defending itself, and responsive to threats such as hybrid war. To this end, leaders have since Bratislava committed to serious defence cooperation, and begun using the EU's leverage to confront Islamist radicalisation on social media. We have also maintained the pressure to create, modernise and link EU databases needed for border security.

Over the past year, two other developments have brought fresh hope in the European idea. Firstly, our conduct in the Brexit talks has shown the European Union at its best: in terms of unity, political solidarity and fairness towards the United Kingdom, from drafting the EU guidelines to the negotiations themselves. And secondly, the European economy has woken up. Few economic observers would have predicted a year ago that average GDP growth in the European Union would be 2 per cent; that the eurozone would be recording its fastest rate of growth since 2011; or that the common currency would be enjoying the highest levels of popular support in over a decade. Unemployment has now fallen below 8 per cent. Leaders will now discuss the future of our Economic and Monetary Union at the Euro Summit in December.

Denis de Rougemont, the Swiss philosopher whom I referred to last time I was here, once said: "the knowledge of true danger may cure us of false fears". That is what has happened in Europe since we started work on the Bratislava agenda. Europe has got its act together, but given the challenges we face, we cannot be complacent. It is for this reason that at the summit in Tallinn two weeks ago, European leaders discussed how to speed up decision-making at the European level, but above all, how to maintain our unity at 27. I was also given the mandate to develop the Leaders' Agenda for the next two years. I am now in the middle of these consultations, whose main aim is to provide real solutions to real issues of concern for our citizens, inter alia unemployment, irregular migration, fears connected with globalisation, and, of course, still Brexit. Here I would like to refer to Prime Minister Theresa May's recent words. We hear from London that the UK government is preparing for a "no deal" scenario. I would like to say very clearly that the EU is not working on such a scenario. We are negotiating in good faith, and we still hope that the so-called "sufficient progress" will be possible by December. However, if it turns out that the talks continue at a slow pace, and that "sufficient progress" hasn't been reached, then - together with our UK friends - we will have to think about where we are heading.

Going back to the Leaders' Agenda for the next two years, your contribution is also very important, and I will pay close attention to it. Last year, I wrote to your President, asking the European Committee of the Regions to start a reflection on Europe, so that the voice of regional and local authorities is heard. I understand that already 100 meetings have been held around Europe to prepare this initiative. I can only thank you for your generous response to this challenge, and I look forward to the results with great interest.

Before you start the debate, allow me - at this extraordinary time for Catalonia and the whole of Spain - to address in your presence the President of the Generalitat de Catalunya, Mr Carles Puigdemont, shortly before his speech. I appeal to you not only as the President of the European Council, but also as a strong believer in the motto of the EU: "United in diversity", as a member of an ethnic minority and a regionalist, as a man who knows what it feels like to be hit by a police baton. And as a former prime minister of a big European country. In brief, as someone who understands and feels the arguments and emotions of all sides.

A few days ago, I asked Prime Minister Rajoy to look for a solution to the problem without the use of force. To look for dialogue. Because the force of arguments is always better than the argument of force. Today I ask you to respect - in your intentions - the constitutional order and not to announce a decision that would make such a dialogue impossible. Diversity should not, and need not, lead to conflict, whose consequences would obviously be bad: for the Catalans, for Spain and for the whole of Europe. Let us always look for what unites us, and not for what divides us. This is what will decide the future of our continent.

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Speech by the President of the Eurogroup at Eliamep in Greece

Speech by Eurogroup President Jeroen Dijsselbloem on 31 May 2013 at Eliamep, the Hellenic Foundation for European and Foreign Policy

Ladies and Gentlemen, fellow Europeans,

Thank you all for a warm welcome. This is my first visit to Greece and I try to do as much in one day as I can. I am very pleased to be here for this important discussion on how to tackle the challenges in the euro area Our main goal at the moment is to deliver sustainable growth. I am very conscious of the difficult times that Greece is going through and the huge efforts that are being made by Greek citizens to overcome the country's challenges. The global financial crisis exposed fundamental weaknesses in the way we have run our economies throughout the Eurozone. We are now dealing with the fall out of this crisis and in a way repairing the mistakes of the past. It is a painstaking task, but one that is slowly but surely bearing fruit.

The Greek economy, as that of other countries in the Eurozone, is forecast to return to growth at the beginning of 2014.

  • Confidence is returning. This is supported by the achievement of fiscal targets; the credibility of recently legislated reforms; and by strong improvements in Greece's cost competitiveness.
  • The banking sector is strengthening as deposits and liquidity return, following EU/IMF disbursements and Greece's debt reducing measures.
  • The rebalancing of the economy towards export-oriented growth has begun and, as a result of improved competitiveness, net exports are expected to be positive this year.
  • Measures designed to cut red tape and definitively end closed markets and professions are starting to bed-in and the business environment is improving. As your Prime Minister said to me today: to roll out the red carpet and clear out red tape. 
  • Market sentiment is more positive. For example Fitch recently upgraded Greece to B minus. Spreads on Greek bonds are decreasing.

I realise these positive developments are not yet apparent in the daily lives of Greek citizens. I also realize the measures that are needed to get Greece back on track are extremely demanding. But once a country has lost access to the financial markets radical action becomes essential and unavoidable to return to fiscal sustainability. Indeed across the whole of the euro area, we have no choice but to take the difficult decisions required to return our economies to growth and at the same time retain our social model, which is our ultimate goal.  

So I welcome the fact that the indications for the future are positive and that the work undertaken to date in Greece has not been in vain. We are making progress in the right direction:
towards growth and jobs. As in many other European countries, the key concern here in Greece is of course unemployment with unacceptably high levels; especially among the younger generations. By threatening the prospects of younger Europeans, unemployment is threatening the very fabric of our society.We cannot let young people pay the price of past mistakes. 

The euro area cannot provide the answers to all individual problems. But Euro zone Member States can, by working together, take measures to improve access to the labour market and improve competitiveness. Europe supports programs to create new job opportunities for the young. The EU Structural Funds can also help underpin continued investment in infrastructure and social services.

The euro area has a clear strategy in this regard, although it will always need to take into account the circumstances in individual countries and sometimes be adjusted

First, we must continue, in a sensible way, fiscal consolidation that will enable us all to get our public finances back on a sustainable footing. High debt levels cause costs of borrowing to rise, they stand in the way of productive investments, they prevent spending on education. We have a duty not to put a heavy burden on future generations with enormous public debts, and to bring public finances under control in all Eurozone countries. Let me stress this point. Tax reform is about fairness. Lack of fairness undermines the tax morale, and confidence in our common institutions. Strong resolve is needed. This is crucial to improve revenue collection, which will contribute to the achievement of fiscal targets.

Secondly, the Eurozone countries must tackle the root of the problems that led to the initial collapse of the financial sector. To do so we must push forward with the completion of a Banking Union. New capital requirement rules will make the financial sector better equipped to manage risks and absorb shocks. The recently agreed Single Supervisory Mechanism will ensure that we will finally have independent European checks and balances for banks. The next step is to finalize the instrument for direct recapitalization of banks and hopefully we will reach political agreement in June. And at the same time agreement on bank resolution (the so-called Recovery and Resolution directive): a set of clear rules on how to resolve banks.

In this regard, we must make sure that those that aim to benefit from excessive risk taking, will also be those that bear the lion's share of the burden of a rescue. We hope to make significant progress before summer on these elements of the banking union.  

Thirdly, we must press ahead with the structural reforms needed to create new competitive strength and enhance growth. Europe has to become more competitive in the current global context. This implies improving education, better quality of public services, reforming the judicial system and stimulating the business environment. This is in the end how the jobs lost during the crisis will be replaced. So our structural reform agenda for all countries and especially for Greece must be about fostering entrepreneurship and innovation.

European funds should be fully used to this purpose. The European Investment Bank is making even more funds available to extend credit to SMEs, so no business opportunities are missed.

Ladies and gentlemen,

Greece is making good progress in difficult times, moving in the right direction. The key priority now is to ensure this improved fiscal position is sustainable in the long term by tackling the imbalances in the economy which made Greece, as other Eurozone countries, vulnerable to the global financial crisis. Greece has a longer tradition than any other European nation of ingenuity and of competing with the best. Looking forward it is well placed to exploit its truly strategic geographical position in view of today's global trade flows, and it has a wealth of human capital and natural resources upon which to draw. As we work together to the best position for Europe to compete globally, Greece has a major contribution to make. So it is crucial that we strengthen the European economy together and that euro area partners stand side by side in these difficult times. Our future depends on our ability to cooperate as equal partners as we reform our economies. This is the spirit I wish to continue to foster in the euro area and which will deliver results. 

I thank you for your attention and I look forward to having a discussion with you.

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Speech by Eurogroup President Jeroen Dijsselbloem on 28 October 2013 at Nueva Economía Forum in Madrid, Spain

Ladies and gentlemen,

It is with great pleasure that I address you here today. I would like to thank Luis for providing this opportunity. The subject that I will discuss today, is recovery and reform. A suitable topic for a Spanish economic forum, since Spain has accomplished much in this respect. Since receiving support for the banking sector, banks' balance sheets have improved markedly. This has led to better financing conditions for both the government and financial institutions. Progress has been made in budgetary consolidation and macro-economic imbalances have diminished.

Consumer and business confidence have been on the rise, unemployment appears to be stabilising and in the third quarter Spain made a return to economic growth. 

The measures taken have not been easy and the job is not yet done. But all signs indicate that Spain has turned a corner and is now on the road to recovery. As a result, Spain is now in much better shape than it was a year ago. I therefore don't think that discussions on the exit from the ESM program will be particularly tough. Since many euro area countries are facing similar challenges, it is encouraging to see what Spain has accomplished. 

I see these encouraging signs also in the programme countries. In the past year I have visited, amongst others, Greece, Portugal and Ireland. During these visits I was impressed with the efforts that these countries have undertaken, both in fiscal consolidation and in reforms. We can now see the results of these reforms in the economy and financial markets. Two years ago all focus was on short-term survival. Now we are all looking towards the future again. This change in atmosphere is a tribute to all that has been achieved.

From stabilisation to recovery

Ladies and gentlemen,

in recent years European policy has mostly focussed on stabilisation. We have succeeded in avoiding a financial collapse. We have fixed flaws in the design of the Economic and Monetary Union. We have taken many measures that would have been unthinkable in the past. Through this, the European leaders have shown our determination and commitment to the euro as an anchor for financial stability and an engine of growth. The euro is part of the solution, as Luis just quoted and not part of the problem.

However, the work on stabilisation is not yet fully complete. The highest priority is now the move towards a full banking union. In my view this is essential to sever the dangerous link between sovereigns and financial institutions. Keeping in mind how big this task is, I think our progress has been remarkable. I am confident that we will remain on track to complete the banking union on schedule. In this context, I strongly support the principle that risks are borne by the investors that took them, not taxpayers.

The measures we have agreed have succeeded in restoring calm to financial markets and the recession appears to be over. Does this mean the euro area has completely recovered from the crisis? This is still doubtful. In my view, two challenges remain: restoring economic growth and preserving the European social model. Both are strongly interconnected. I will briefly go into both challenges.

Restoring economic growth

Economic growth is essential for a successful recovery from the crisis. However, restoring growth will not be a simple task. We should realize that it will be very hard to return to pre-crisis levels of growth. There are two main reasons for this.

First of all, growth in the years before the crisis was fuelled partly by credit. These debts, both private and public, now have to be repaid. Also, credit will not be as easily accessible as it used to be. If credit is priced too cheaply, it will lead to boom-bust cycles that are ultimately bad for real economic growth.

Secondly, Europe faces a strong demographic challenge that will be felt in the decades to come.

With this in mind, the question is: what can we do? We have already strengthened economic and budgetary policy coordination in Europe to improve incentives for Member States. This was accompanied by a number of growth-enhancing measures at the European level. For instance, we have doubled the capital of the European Investment Bank. We have strengthened the internal market further. And we have undertaken initiatives to improve financing conditions for small and medium enterprises.

I certainly believe we can achieve even more in that respect, for example by negotiating bilateral trade agreements. Recently negotiations with Canada were concluded successfully. I hope that we can achieve similar success in talks with the United States, Japan and the Mercosur countries.

However, most untapped potential lies with the member states. The OECD has estimated that European countries can each gain between 5% and 20% of extra GDP growth over the next ten years by implementing structural reforms. These reforms encompass all measures that improve the functioning of economies and therefore stimulate growth.

There is no one-size-fits all solution. Since countries are diverse, the necessary structural reforms can also vary considerably. However, in broad terms there are challenges that are relevant for all countries in the euro area. For instance, much can be gained by creating a better business environment. World Bank and the OECD indicators show that there is room for improvement in all countries. Of course the actions would differ across nations, so countries should address their own specific bottlenecks.

Also, economic efficiency is greatly hampered by protected sectors and professions. For example, the European Commission has identified no less than 4700 regulated professions in countries of the European Union. Some of these make sense, such as medical specialists. Others much less so, like golf instructors or second-hand car salesmen.

Preserving the European social model

The second challenge is preserving the European model. In my view, the European social model is what sets Europe apart from the rest of the world. European governments spend on average 10% of GDP more than other governments. This is entirely due to social expenditure. Of course there are differences between countries, which is a reflection of voters' preferences, tradition and history. But on the whole, European countries have a very even distribution of prosperity compared to the rest of the world.

Remarkably, this extra government expenditure did not prevent strong income growth. In fact, per capita GDP in Europe is among the highest in the world. It is often suggested by economists that every redistribution of wealth goes at the expense of economic growth.

The European experience demonstrates, however, that redistribution can go hand in hand with growth. In my view this is because public support is essential for any economic model in a democratic society. If only the happy few reap the benefits of economic development, this will lead to social unrest. This in turn will ultimately damage growth. Since the European voters' preference is clearly in favour of a certain degree of income distribution, I strongly believe that the European social model supports economic growth instead of harming it.

Preserving the European social model does not mean that we should keep everything as it is today. Our social systems were designed in a time where demographics were favourable and economic growth was self-evident. In order to survive, these systems need to adapt to the new economic reality. For example, life expectancy in Europe has increased by about eight years in the last four decades. During the same period, the effective age of retirement decreased in all countries. Clearly, this is untenable in the long run.

Also, overall unemployment has increased strongly across the euro area. But youth unemployment is even higher, sometimes twice the level. Given the prospect of population ageing, we cannot afford to sideline young people for a prolonged period. We should therefore do our utmost to ensure young people have no barriers in attaining education or employment. This includes a critical look at the role of labour market institutions.

A European agenda

So, how should we address these challenges? Think of the euro zone as an apartment complex. We, the owners' association, have restructured the foundation, rewired the building and enforced the walls. But to make the renewed building a success, everyone should improve the inside of their own apartment. In short: we have achieved much at the central EU and euro area level, but this cannot solve all problems.

The focus should now be on promoting structural change at the member state level, because the areas where reforms are needed belong mostly to the national domain. Diversity between member states has always been Europe's strength. It reflects the different preferences of voters and encourages innovation through competition. This diversity enables us to learn from each other. The European Commission can play the role of facilitator in this process.

I therefore propose to further strengthen peer review in the area of structural reforms, both in scope and in political commitment within the European Semester. We should enter into this process offensively. We should try to learn from each other in a positive way. Where useful, this can be supported by mutual technical assistance. We should enlist the advice of international institutions. Their insights can be useful to identify bottlenecks and design appropriate policies.

However, this process cannot become too informal. Given the strong interdependencies in the euro area, we should not be afraid to remind each other of our responsibilities. Coordinated action between member states can also be instrumental in overcoming vested interests.

The agenda should be based on more than just peer review and peer pressure. In general we need to focus European economic governance not only on budgetary targets, but also on the completion of meaningful reforms. For instance, the European budgetary rules allow for an extension in bad economic times. This leniency is now granted without any conditions. In future cases, I propose to link deviation of fiscal targets in the Stability and Growth Pact to the concrete achievement of reforms. In other words only if a country pushes forward crucial reforms can the deadline for fiscal targets be extended. Softening of fiscal targets should be tied more concretely to completion of reforms.

Lastly, I would like to see a clearer link between the expenditure from the European budget and loans from the European Investment Bank on the one hand and the implementation of structural reforms by member states on the other. A country growth strategy, modelled after World Bank practice, would be a suitable tool for this.


In conclusion I would like to affirm that the two challenges I mentioned - restoring growth and preserving the European social model - cannot be seen separately. In fact, I see them as mutually reinforcing.

Economic growth is essential for the affordability of social spending. Conversely, social protection is a cornerstone of how we in Europe organise our societies. This creates a stable environment for investing in the future. To achieve these twin goals, each Member State has the responsibility to contribute. Together this builds a stronger Europe.

I thank you all for your attention.

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Speech by the President of the Eurogroup, Jeroen Dijsselbloem, at the Europe House Lecture

Your Excellencies, ladies and gentlemen,

This fifteenth-century building is the former home of the Protestant community of The Hague. Our King, Willem-Alexander, was baptised here. The building is no longer used as a church, but also for cultural and social activities. I still find it a most inviting location for a meeting on community sense. Community sense in Europe of course.

Those who have studied the history of the European Union know that we started with the European Coal and Steel Community. After that we had the European Economic Community. And until the Lisbon Treaty took effect, one of the three pillars of the European Union was called 'the European Communities'.

Personally, I still prefer the term 'community'. It describes better how we work together in the European Union in general and in the eurozone in particular. In the Netherlands, a 'union' sounds a little more like something that has been agreed upon in a boardroom. Whereas a community sounds like something built from the grassroots up, by the people.

People form communities all the time. What defines every community is that its members have common characteristics and shared interests. In a well-functioningcommunity there is a form of solidarity among its members and an understanding of the responsibilities towards one another. The seventeen, soon to be eighteen, member states of the Eurozone form a relatively young community, with the euro as the defining element. To make this community viable, the founding fathers of the euro area created a set of rules. For example, they gave the European Central Bank a clear mandate and laid down fiscal rules in the Stability and Growth Pact. And until 2008, before the fall of Lehman Brothers in the US, it seemed to function quite well.

In my speech today, I want to explain that in recent crisis years we have not only saved the community but strengthened it. I will then discuss the new challenge that lies ahead: improving our growth performance.

The euro crisis has put our community to the test. It raised doubts about member states' commitment to the rights and obligations within a monetary union. And subsequently that posed a threat to the heart of the community and the functioning of the euro area. But we reacted as a community should. We showed solidarity, strengthened our commitments and accepted our responsibilities. Solidarity in a community requires effort. Solidarity is not charity. When unemployed people apply for benefits, society asks them to do their utmost to find a new job. In a monetary union, too, solidarity means that those receiving support must also show commitment and responsibility. In that respect we shouldn't underestimate the significance of what we have achieved.

Last Thursday we decided on the clean exit of Ireland and Spain. After three years in the programme for Ireland, and one and a half years for Spain, those countries are back on their own feet. We shouldn't underestimate the significance of countries supporting and financing loans to cover the debts of other countries. Nor should we underestimate the significance of the efforts made by Greece, Portugal, Ireland, Spain and of course Cyprus. They have carried and will carry out radical reforms and asked their people to make painful sacrifices. Many in the programme countries have suffered major income losses. We, the politicians, have an obligation to keep explaining to our people how all Europeans have taken responsibility. That's also part of community building.

But we did not only tackle the huge problems in the short term. We realised that the rights and rules for the European monetary union were incomplete and needed maintenance. In fact we are still working on the further design of the system. We have created a permanent safety net in the form of the European Stability Mechanism, the ESM. And we are now in the middle of setting up a Banking Union.

To strengthen our obligations and responsibilities in the area of fiscal policy, we have designed an essential set of rules, known as the Six-Pack and the Two-Pack, enhancing the functioning of the Stability and Growth Pact. It provides tools to improve our national fiscal frameworks. It creates a mechanism for monitoring possible macroeconomic imbalances. And it facilitates effective EU-level intervention when necessary. In fact, in two days we will discuss one another's draft budgets in the Eurogroup as a direct result of the Two-Pack. It is the first time we will discuss our policies for the next year before the start of the fiscal year. In my opinion that provides a real opportunity for the European dialogue to have an impact on the new national budgets. Until recently, discussions among finance ministers on national budgets were characterised by let´s say, non-intervention. Now the atmosphere is strikingly different. We realised that European governance of fiscal policies means far more than ticking the box of the three per cent deficit target. When setting deficit targets and deadlines, it is also important to discuss the more structural measures that are needed.

European economic governance is about accepting that members of the euro area have a clear interest in other member states' economic affairs. And it is about accepting that there is a European interest in your own budget. We realised that having a set of rules is not enough. Members need to point out to one another their common responsibilities in order to keep the community sound and stable.  And even though every now and then a government leader tells the European Commission to mind its own business, the work of the Commission has been successful. During economic hard times we have managed to stabilize and lower deficits. The Eurozone budgets are now more sustainable than in the UK, the US and Japan. So we have made significant progress in shaping a more robust community.

Now, let me discuss what I think is the next challenge for all eurozone countries as we enter a new phase. The fiscal outlook in the programme countries has improved significantly. Ireland and Spain are ready to stand on their own feet again. Europe has shown its ability to adapt. But let's take a look at the European Commission's latest growth figures: growth in the euro area for this year is still negative at -0.4 per cent. Potential growth is weak, at a forecast 0.7 per cent in 2015. The unemployment rate will remain in double digits in the coming years. This is the new challenge for the countries in the Eurozone: improving our growth performance and reducing high unemployment. And at the same time preserving and modernising our unique European social model.

To make this possible, our economies need to be revived and our social systems need to adapt to the new economic reality. It is simply a necessity at a time when jobs are easily shifted to other parts of the world and the population of Europe is ageing. Obviously, every country in the Eurozone, without exception, needs to strengthen its competitiveness. We need to improve our earning capacity.

For decades after the Second World War, Europe was an inspiration for many parts of the world. The historic economic performance of the old EU member states after the war, with average annual growth figures of over four per cent, enabled Europe to quickly catch up with the US. After joining the EU, member states in Southern Europe showed the same kind of growth, and Central and Eastern Europe followed their example later. Between 1995 and 2009, countries like Poland and Estonia also recorded growth in excess of four per cent on average.

Nowadays we tend to look with envy at Asia with its vibrant and dynamic economy. But we don't have to look so far to see promising economies catching up. A few weeks ago I visited Latvia. A country that suffered severely in the early years of the crisis. The European Commission is now forecasting solid growth figures of over four per cent for the next few years for this country. And whereas unemployment was around twenty per cent in 2010, it will be halved by next year. This 'good practice' can serve also as an inspiration for other member states. I realise that the Latvians have had to make great sacrifices to get this far. But it shows that member states can recover and significantly improve their growth perspective. We therefore need to remove the inefficiencies hindering our economies. The OECD estimates that over a period of time the economies in the euro area can increase Gross Domestic Product by up to one fifth by implementing structural reforms. We need to get rid of the barriers preventing us from fully adapting to the new economic challenges and being competitive. But most of all we need to get rid of them to get people back to work. For the biggest challenges lie in the labour market.

We tend to speak of outsiders and insiders on our labour markets. Yet we cannot allow ourselves to have outsiders, nor can we afford it. We need to profit more from the energy of young people and the experience of older people. To lower the costs of labour. To make it attractive to hire people. To improve the education system and pursue effective labour market policies. These are essential elements for increasing our growth potential and making our economies more competitive and dynamic. Ultimately, the question is not how much money we should invest in our economies, but how to create economies people want to invest in.

This brings me to Europe's role in fuelling this growth agenda. Clearly, the European level has a major part to play. Despite everything that may divide the European countries sometimes, politically we have a lot in common. Raising the retirement age is not only an issue in France or Italy, but also in Finland and Germany and basically in all other countries. And Ireland and Spain are not the only countries that were confronted with trouble on the housing market. In Slovenia, the Netherlands and in many other countries too, the housing market is under pressure. We can learn from one another's experiences. But perhaps even more important: as in every community, the members must have the courage to confront each other with inconvenient truths. We need to make one another aware of our weaknesses and put forward best practices for solving them. We need to lead each other firmly to the right solutions and the best ways to implement them.

Now, let me be clear: the main responsibility for these reforms lies with national politicians. They understand the national economic challenges best. They are best placed to engage in a dialogue with society, with social partners, with citizens, with voters. But across Europe we should adopt country growth strategies that address the specific growth problems. These should include the crucial reforms required. The instruments Europe provides should support these reforms and be part of the country growth strategies. For example, by making structural reforms a condition when setting deadlines in deficit procedures. Or by using European structural funds to implement and support structural reforms.

Ladies and gentlemen,

The European growth model has proven its value since the European Coal and Steel Community was founded. From the German Wirtschaftswunder in the fifties and sixties, to the Celtic Tiger in the nineties and the Baltic miracle at the beginning of this century. They all saw periods when economic growth hit double digits.

'A convergence machine', Europe is called by the World Bank. But it's a machine that needs constant maintenance.

In the past few years the Eurozone community was put to the test for the first time. It was difficult, but in the end the members responded by shouldering their responsibilities. We have laid a stronger basis that has created new hope for Europe. Now we have to pass the next test. Moving out of the crisis, leading politicians must maintain the sense of urgency and take their countries through an inevitable transition phase. Let's use our full potential and make our economies more dynamic. Let's pursue the path to sustainable growth and modernise our social model. Let's go forward with confidence to the next, post-crisis phase and turn Europe into a convergence machine again.

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