26. The European Council reviewed the economic situation and noted that the overall economic outlook is improving although important challenges still remain. It agreed on the way forward to the March European Council.

27. The European Council called on the Council to reach in March a general approach on the Commission's legislative proposals on economic governance, ensuring full implementation of the recommendations of the Task Force, so as to reach a final agreement with the EP by the end of June. This will allow strengthening the Stability and Growth Pact and implementing a new macroeconomic framework.

28. It called on the European Banking Authority and other relevant authorities to conduct ambitious stress tests and on Member States to ensure that concrete plans, compliant with EU State aid rules, are in place to deal with any bank that demonstrates vulnerabilities in the stress tests.

29. In the context of the European Semester and on the basis of the Annual Growth Survey presented by the Commission, the March European Council will identify the priorities for structural reforms and fiscal consolidation for the next round of stability and convergence programmes as well as in the EU's areas of competence, including the single market. On this basis, and steered by the Europe 2020 integrated guidelines, Member States are invited to submit in April their national reform programmes as well as their stability or convergence programmes.

30. The March European Council will also adopt the final decision on the limited treaty change to set up the European Stability Mechanism.

31. The European Council welcomed the attached Statement by the Heads of State or government of the euro area and the EU institutions.

 

Following their December 2010 Statement, and reiterating their readiness to do whatever is required to ensure the stability of the euro area as a whole, the Heads of State or government of the euro area and the EU institutions reviewed progress in the implementation of the comprehensive strategy to preserve financial stability and ensure that the euro area will emerge stronger from the crisis.

This strategy includes the legislative package on economic governance, the stress tests and the financial sector repair, and the implementation of the European semester. In addition, they agreed on the following steps as part of the global package to be finalized in March:

·         Continued successful implementation of existing programmes with Greece and Ireland.

·         Assessment by the Commission, in liaison with the ECB, of progress made in euro area Member States in the implementation of measures taken to strengthen fiscal positions and growth prospects.

·         Concrete proposals by the Eurogroup on the strengthening of the EFSF so as to ensure the necessary effectiveness to provide adequate support.

·         Finalization under the chairmanship of the President of the Eurogroup of the operational features of the European Stability Mechanism in line with the mandate agreed upon in December.

Building on the new economic governance framework, Heads of State or government will take further steps to achieve a new quality of economic policy coordination in the euro area to improve competitiveness, thereby leading to a higher degree of convergence, without undermining the single market. Non-euro members will be invited to participate in the coordination. The President of the European Council will undertake consultations with the Heads of State or government of the euro area Member States and report back, identifying concrete ways forward in line with the Treaty. To this effect, he will closely cooperate with the President of the Commission. He will ensure that the Heads of State or government of the interested non-euro area Member States are duly involved in the process.

…We also discussed of course the economic situation in Europe and in the Eurozone. The outlook has substantially improved, including in Eurozone countries which were in difficulty recently. Spreads are significantly lower than a few weeks ago, and business indicators show confidence and optimism. The decisions taken last year -- by all of us together and by individual governments – are clearly paying off. However, we are aware that there is still a lot of homework to do. It is not a time for compliances; we will draw the lessons from the crisis.

We decided to use the momentum to adopt a comprehensive package in March. Let me recall the main elements of this package:

·         for the banking sector: ambitious stress tests, with Member States having the plans ready in case vulnerabilities appear;

·         an agreement on stronger economic governance, following the Task Force report and the Commission proposals;

·         concrete proposals on strengthening the temporary Stability Facility "so as to ensure the necessary effectiveness to provide adequate support";

·         a final decision on the limited Treaty amendment required for the permanent stability mechanism and the definition of the operational features;

·         the implementation of existing programs in Greece and Ireland

·         and the implementation in the Eurozone of measures to strengthen budgetary positions and growth prospects.

For all these points, we decided on the direction and we gave a mandate plus deadlines to the different institutional actors. We will adopt the full package in March.

The Heads of State or Government of the 17 Eurozone countries also discussed how to achieve a stronger economic convergence, by working closer together in national policies increasing competitiveness. That is new. Instead of only looking at the outcome (for instance the annual deficit), one could also look at the policies ‘behind’ the outcome.

I welcome that Member States of the Eurozone feel a stronger need for economic coordination. The macro-economic surveillance which we decided in the Task Force Report, already opens new avenues.