Speech by Herman VAN ROMPUY President of the European Council at the
Ambrosetti Forum A TEST OF SOLIDARITY
The wisdom of President Napolitano inspires me to take a wider view.
Since 1945 European states have worked together.
Ever more intensively, securing peace on the continent, and prosperity for
our citizens.
It is worth keeping in mind why today we are concentrating all our efforts on
overcoming the economic and financial crisis, together.
It is about much more than just monetary operations: the European project
itself is at stake.
Our Union matters to us for countless reasons. But ultimately, it matters
because Europeans have experienced in the past -- tragically -- what happens if
we all go alone;
and ultimately, it matters because we know -- acutely -- that we must join
forces today if we are to count among the global players of tomorrow.
Our Union is not just worthwhile, it is vital.
Member States know it, business leaders know it, opinion-makers know it, the
rest of the world knows it.
But it is not self-evident for a majority of our citizens. And this also is a
political reality.
However, something is changing here, under the pressure of the financial
crisis.
We are now realising that the euro completely changed the nature of the
Union. That it was a game changer.
Up until then, Europe was often spoken of in idealistic, abstract terms; and
even when its concrete achievements affected people's lives, it was always in
positive terms.
Complaints about milk quota or cucumbers put aside…, "win-win" was the only
game in town.
With the euro crisis, for the first time, citizens are confronted with the
hard fact that some costs come alongside the benefits.
For instance the costs and efforts to defend a common currency during a
financial crisis.
Citizens are also realising now for the first time that they are in this
together.
That what happens in another country – with banks, bubbles or budgets –
affects them too.
Being jointly responsible for a common European good can be a painful
discovery for people who are struggling, in their own country, to find a job or
to make ends meet.
I strongly disagree with those who conclude hastily that the crisis has
killed solidarity between European countries.
Not at all!
The crisis has revealed what it takes to be in a Union.
In fact this is the very first real test of solidarity in the history of the
Union!
Of course, there are tensions and constraints, there is opposition and
critique, there are caricatures and cartoons -- I am very well aware of all of
that! And yet.
And yet a gigantic collective effort is taking place, involving all euro
countries, all EU institutions, all citizens, to muster the political will, the
parliamentary majorities, and the means and money, to help each other and to
come out of this crisis together.
It is de facto solidarity of an unprecedented magnitude.
The figures speak for themselves: we have committed hundreds of billions euro
of financial support.
Nobody should underestimate this joint political determination.
Of course, when we sit together around the European Council table and during
Eurozone summits, taking tough decisions on rescue deals or budget rules, I
cannot read the thoughts and motives of all individual leaders.
Yet in that room something is very clear.
We are not just working for the euro's survival, we are not just working for
its sustainability, no, we are working for its success, for Europe's success.
Safeguarding the legacy of our founding fathers, and securing a better future
for the next generation.
Here, at the Ambrosetti Forum, I should like to give you some concrete
reasons why I am confident that we will get there.
There are three.
First: EU leaders have reached a final understanding on an important aspect
of the crisis, its systemic nature.
They all recognize now that the crisis is not only the sum of the problems of
individual countries, but also the result of deficiencies in the architecture of
the Economic and Monetary Union as a whole.
We Europeans had given ourselves a common currency without the means to
defend it.
We relied mainly on rules without the means and tools to enforce them, or to
manage a crisis.
We dramatically deepened our economic and financial interdependence but
without drawing all the political consequences.
Clearly, over the past two years, we addressed some of the most obvious
deficiencies. But now we need to take a qualitative jump.
What has changed in the past few months – I would say between March and June
– is the determination to go to the heart of the matter.
All eurozone leaders are now putting every issue on the table, without
taboos.
It is urgent work, yet we must do it properly.
Quick fixes won't do.
All leaders also recognise that we cannot solve our short-term problems
without addressing the longer-term challenges.
Indeed, if we want investors to buy 10-year government bonds, we need to show
them where we want the eurozone to be in 10 years time… And if we want our
citizens to support decisions which for many entail a period of sacrifices,
hardship and costs, we must convince them that these efforts are worthwhile,
that things are going to get better.
We will be judged on our results.
So we have a chance to finish a house half built. It is our historic duty to
seize it.
That is why eurozone leaders asked me to steer an in-depth reflection.
I have already given my first thoughts in an initial report in June, in close
collaboration with the Presidents of the Commission, the Eurogroup and the
Central Bank, and we are now in the next phase of this reflection.
I will say more about this in a moment.
Let me first come to the second reason why I am confident we will overcome
the crisis:
the Member States are carrying out ambitious economic reforms, that are
producing results.
It is not only a matter of making up for the excesses of the past, but also
of adapting to an ever more competitive world.
In a way: a test of responsibility.
These structural reforms are key for the economic future of our countries, to
secure growth and create jobs.
And the work has to be done: euro or no euro, EU or no EU.
We see real progress.
Eurozone economies under pressure are regaining competitiveness and we are
reducing harmful imbalances in the euro area.
Take trade.
Spain's large current account deficit of 10 percent before the crisis has
been largely closed – the country is even a net exporter to the eurozone now!
Portugal has reduced its current account deficit by two thirds, and Greek
exports are growing faster than anywhere else in the Union.
Progress in structural reforms is also substantial.
Spain and Portugal have made their labour markets more efficient and this is
already showing in lower labour costs, and over time, it will contribute to job
creation.
Ireland is making such good progress on all fronts that since July Dublin is
back to the international bond markets, attracting considerable investment from
the US.
The world's eyes are on Italy too, and on the impressive reforms carried out
by the government of Prime Minister Monti, to bring Italy back where it belongs:
among Europe's foremost economies – and also, as President Napolitano
stressed, at the core of European integration, where it has been ever since our
founding Treaty of Rome.
Italy is turning its economy around: breaking monopolies, cutting red tape,
fighting against vested interests and working hard to create jobs.
It is also continuing the fiscal consolidation started earlier.
It's a long-term and collective effort, one that involves the government,
businesses, the Italian people.
That's why it is taking place in fairness.
Looking at what has already been achieved, looking at the determination to
attack each problem, one by one, looking at the courage with which Italians are
taking up these efforts, I am confident these efforts, which must be pursued
relentlessly, giorno dopo giorno, will be met with success.
Reforms do pay off, many examples show it.
But reforms need time to be decided and time to yield results.
They take time to show up in indicators, let alone to have an impact on the
real economy.
I mentioned first signs of results, and more will come.
Which brings me to my third point, a third reason to have confidence we will
get there:
whilst these reforms are underway, Europe stands ready to help when help is
needed.
The high risk premia for some countries are not always justified and can be
disconnected from economic fundamentals and reform efforts – and I speak mildly
when I speak in those terms.
Even the historically low interest rates in some countries are too low…!
And high risk premia can have negative repercussions for the stability of the
eurozone as a whole.
For such cases, we have tools and a clear political commitment to do more.
In June, eurozone leaders affirmed that they were ready to use existing
instruments in a flexible and efficient manner.
At the same meeting, we also realised a breakthrough towards a banking union.
And two days ago, the European Central Bank presented a framework under which
substantial action can be taken provided member states carry on their adjustment
efforts.
So we have a triptych:
short-term actions to safeguard financial stability, a long-term vision for
the Economic and Monetary Union, and deep reforms in each and every country, and
this triptych makes the euro irreversible.
And all European leaders and institutions share a commitment to its integrity
too.
So long as Greece is committed to the euro, its partners will continue to
fully support its efforts.
I already mentioned the systemic reflection currently underway on the future
the Economic and Monetary Union.
The report that I submitted in June laid out a vision for a genuine economic
and monetary union, a vision to bring it to its strong and stable end-state.
Based on this report, I have received from the eurozone leaders a mandate to
work on a precise and time-bound roadmap on how to get there.
I am working on it with the Presidents of the Commission, the Central Bank
and the Eurogroup, and we will submit it to the European Council before the end
of the year.
This work focuses on four building blocks:
First:a banking union - to avoid tax payers systematically picking up the
bills for bank failures;
Second: a fiscal union - to avoid unsustainable deficits, including through
more central enforcement and more solidarity mechanisms;
Third: an economic union - to jointly improve competitiveness of the euro
area as a whole, internally and externally,
And fourth and final: a deeper political union - to ensure that these
measures are underpinned by strengthened democratic legitimacy and
accountability.
These four building blocks are inextricably linked.
They are mutually reinforcing, and all four are necessary for the Economic
and Monetary Union to become fully solid and secure.
Achieving this vision will take time and will necessarily be a gradual
process.
But to ensure that we reach our goal, we must embark on this path now.
Some commentators pretend we are faced with the stark choice between either
breaking-up or turning instantly into a federation.
They are wrong.
Europe does not work like that.
We will overcome the crisis not through revolution, but through reform and
evolution.
We are not a state, we are a Union – and we must become a stronger Union.
The work ahead is to define the content and sequencing of all the steps.
First, we need to get the substance right, and then we can talk about the
process, about the legal and institutional means.
At this stage, let me insist on one element in particular: the banking union.
Banks and national supervisors have proved unable to deal with systemic risks
in an integrated financial market.
The pressure on public finances this created in some countries has threatened
the financial stability of the eurozone as a whole.
To break the vicious circle between the crisis in the banking sector and that
affecting public debt in the eurozone, we need better prevention.
Here I want to clear any misunderstanding - what we are calling for is in no
way a union for banks, but one which would allow us to better manage the risks
associated with a fragile, yet powerful sector prone to moral hazard.
This would mean the creation of a euro area banking supervision system
covering all banks, as well as the creation of a euro area-wide guarantee for
customer deposits, and a supranational framework to restructure and resolve
failing financial institutions, with a common backstop but at minimal cost to
citizens.
These two elements, common supervision and common resolution, cannot go
without one another.
For example, how can the risks associated to bank failures remain with
national authorities, when they have handed over supervisory control and are no
longer in charge?
So we need to act rapidly on bank supervision but we need also a clear
timeline with the appropriate sequencing to establish the common resolution and
deposit guarantee.
The European Commission is about to make proposals on the creation of a
single European banking supervisor, and this will mark a first but not the last
important step in this direction.
This is how we are working hard on a long-term plan, while also dealing with
the immediate effects of the crisis every single day.
And I insist: in no way is this just a question of technical problem solving,
it is just as much – and even more so – a work of political conviction.
It is about the choice of which Europe we want to live.
Just listen to all those voices in the euro debates these days across
European countries.
Beyond acronyms and jargon – EFSF, SMP, OMT and all the rest – the talk is
about what is fair, about responsibility, solidarity, about being – yes or no –
part of a wider European community beyond your own national borders.
The leaders have to stand up and make the case.
On employment for instance, the biggest concern of voters: Europe is not a
threat to jobs, no Europe is a source of jobs!
And it is true in many other fields.
The Union is not the problem, the Union is part of the solution.
Earlier I spoke of a first test of solidarity for our Union.
It is my conviction we will pass this test.
Just as we will pass the test of responsibility.
It is my conviction that the forces which hold Europe together are stronger
than those that draw us apart.
The unique fabric of our societies is our utmost strength.
It is woven with the strands of peace, of economic progress, of social
justice, of human dignity.
We are proud to wear it.
It is our message to the citizens and to the world at large, today and
tomorrow.
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