BRUSSELS (MNI) – The following is the second part of a verbatim
text of the introductory statement by European Central Bank President
Mario Draghi in his appearance Monday before the European Parliament’s
Economic and Monetary Affairs Committee:
“Today’s economic environment obliges all countries to take a very
critical look at their past – and it obliges all to take a very
objective view of their future.
It is only against the background of the past that the adjustment
programmes currently underway in several euro area countries can be
understood. It was past economic developments and policies that led to
excessive imbalances in a number of countries. And it was those
imbalances – fiscal, macroeconomic and external – that were neither
healthy nor sustainable.
Unsustainable imbalances provide the objective need for adjustment
programmes – and the degree of the adjustment is directly related to the
extent to which past policies were misguided.
Policy adjustment in the euro area takes place under market
pressures, but less so than for countries outside the euro area because
being part of monetary union shelters countries against some pressures,
notably on the exchange rate.
But this does not mean that the degree of policy adjustment can be
lower. The schedule of regaining full market access within a few years
applies here too. Therefore, perseverance in bold and necessary reforms
is crucial.
A critical success factor is ownership of the programmes by
governments, parliaments and ultimately the citizens of the countries
concerned. An essential precondition for ownership is that policy-makers
communicate clearly about the economic rationale for adjustment. As I
have suggested, this means taking a critical view of the past and an
objective view of the future.
This process has started. Increasingly, national policy-makers make
the case for reform strongly. They point to past developments in
explaining the background of adjustment and now highlight the many
beneficial elements of reforms. Some of these reforms improve fairness
by combating tax evasion or rent-seeking by vested interests, and they
improve the efficiency of the public sector.
National policy-makers are now increasingly making a central part
of their objective the overall aim of EMU: to sustain economic
well-being in the absence of major imbalances, and to generate
sustainable growth in a competitive environment.
In my view, a great deal of progress is underway in this respect.
For example, the Irish authorities have maintained a strong track
record for maintaining reform momentum throughout their programme. They
have also taken important steps towards restoring the stability of the
financial system.
In Portugal, programme implementation remains good and important
progress has been made in such areas as the labour market, the housing
market, the general competition framework, the judicial system and the
transport sector. The Portuguese authorities remain fully committed to
achieving this year’s fiscal target.
The Spanish authorities too have shown that they remain fully
committed to accelerating the structural reform agenda and putting the
financial sector on a sound footing. They are also committed to
improving external competitiveness to lay the foundations for more
sustainable prosperity.
Even without programmes, many policy-makers are bold in reform. In
Italy, for example, reforms to increase competition, reduce the
administrative burden and increase labour market flexibility have been
important measures. The country’s spending review will help to achieve
the fiscal targets.
Virtually all other countries are undertaking measures to improve
fiscal solidity and the basis for sustainable growth without excessive
imbalances. So despite the current challenges, countries’ progress is
strong and the fundamentals of the euro area as a whole are sound.
The euro area’s fiscal deficit is declining towards 3% of GDP;
price stability is ensured; and the external accounts have remained
close to balance. All these are reasons to pursue reforms with a strong
degree of confidence.
4. A longer-term vision for EMU
Why then do we still have tensions in a number of market segments?
Let me first stress that a lot has been done at country as well as euro
area level in terms of economic reforms and governance. But we need full
implementation. We have to make clear that EMU is a union based on
stability at national and aggregate levels.
Stability at national level means completing reforms to ensure
sustainable growth without major imbalances. Stability at aggregate
level means implementing the vision recently presented at the summit.
The central message of that vision is this: the euro is here to
stay – and the euro area will take the necessary steps to ensure that.
In my view, the core of the report submitted by President Van
Rompuy is the identification of four building blocks:
First, a financial market union that elevates responsibility for
supervision of banks to the euro area level.
Second, a fiscal union that reinforces oversight of budgetary
policies at the euro area level and also provides some fiscal capacity
to support the functioning of the currency area.
Third, an economic union with sufficient mechanisms to ensure that
countries can achieve sustained prosperity without excessive imbalances.
And finally a political union that strengthens the legitimacy of
EMU among euro area citizens and deepens its political foundations.
These four building blocks are mutually consistent and coherent,
and should be pursued in parallel. I am looking forward to the work on a
roadmap that has started. In my view, three issues deserve particular
attention:
First, we need to move towards a further sharing of sovereignty in
the fiscal, financial and economic domains. There can be no shortcuts in
establishing a sound and stable EMU.
Second, EMU is an integral part of the Treaty. This calls on all
relevant bodies and actors to engage constructively on improving its
functioning, not only at Union but also at national level. To call for
an impeccable application of the Treaty and at the same time refuse
closer union mentioned in Article 1 of the Treaty is inconsistent, to
say the least.
Third, we need to accompany deeper euro area integration with
significant progress on democratic legitimacy and accountability. There
is no doubt that you and your colleagues – the members of the European
Parliament, the directly elected representatives of the citizens of
Europe – will continue to play a central role in the steps towards
political union.
Thank you for your attention.”
[TOPICS: M$$EC$,M$X$$$,MGX$$$,M$$CR$,MT$$$$]
