Strengthening our growth potential through continued structural reform is also important since external challenges to growth have increased.
The first decade of EMU coincided with the integration of the emerging economies into the European economy, notably from eastern Europe. It was also boosted by the accession of China to the WTO in 2001. Not all countries in the EU have been using these opportunities to the same extent. However, success on global markets has now become essential for those countries that ran large current account deficits.
Unfortunately, the outlook for global GDP growth and world trade appears now weaker than we had expected a few months ago. Growth has lost momentum in China. Brazil and Russia have performed poorly. More broadly, the lack of will or ability to deliver reforms that are necessary to strengthen economic fundamentals is a major risk in some emerging market economies. Renewed volatility of capital flows could aggravate uncertainty and weigh on growth in the world economy and thus also on Europe.
In addition, in the US, the next fiscal cliff in 2014 will require very decisive action by policymakers. Moreover, the eventual phasing-out of monetary stimulus does call for careful calibration and communication to avoid ramifications to growth.
In this regard, the Transatlantic Trade and Investment Partnership between the US and the EU is of enormous importance. An ambitious and comprehensive agreement could bring significant economic gains as a whole for the EU (€119 billion a year) and the US once the agreement is fully implemented.
In Europe, we have tended to regard reinforced economic policy coordination as an internal affair. But the crisis has clearly demonstrated that international fora are very valuable. This has been obvious for financial regulation in global markets. And the recent capital market volatility indicates that it might also be useful in other areas.
However, this will not and cannot replace our own efforts to provide businesses with the environment they need to succeed in global competition. Competitiveness is fundamentally based on the real factors of production and productivity, especially on our innovative capacity and well-trained labour force.
There is further potential to simplify the business environment, reduce red tape and improve the quality of legislation. And yes, also at EU level, where the simplification and streamlining of EU legislation is promoted through the on-going regulatory fitness and performance programme (REFIT).
The latest economic indicators confirm that our economic strategy is producing a sustained recovery. We must strengthen it and proceed on our way to reform the European economic and social model. Europe should not resist global economic forces: it should seek new opportunities from them. Otherwise we run the risk that Europe becomes an open air museum of industrial monuments.
But Europe’s road to recovery will continue to require difficult choices and persistence. It is now essential to stay the course of economic reform.
Full speech
See also: The EU's bilateral trade and investment agreements – where are we?
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