22 March 2012

EC President Herman Van Rompuy: "Financial communication in a turbulent financial world"

"Let me mention three indicators:

First: the "bond spreads" are down for a number of countries (Italy, Spain, Belgium in particular). This is a clear result, immediately understandable to citizens in the countries concerned. A real fact, which should be communicated! It is a signal of confidence.

Secondly: Consumer confidence is rising. For instance in Belgium, which is always a good indicator for the rest of Europe.

Thirdly, and most recently: Yesterday, investors massively backed the EFSF rescue fund, which was able to complete a bond hat-trick. The tide is clearly turning here. And this is linked to the fact that there now is a clear funding programme for Greece.

It is too early to say that we are in a "post-crisis period", we should remain prudent, but we are surely in calmer waters. And we should make the best use of this moment. 

If you "zoom out" somewhat more, taking a larger time perspective, the pattern upon which I base my cautious optimism because more clear.

Why such a difference between the situation in March 2011 and in March 2012?

• We have taken strong measures at Union level, the most recent one being the signature of the Fiscal compact treaty.
• There has been convincing action by Member States to address difficulties (Italy, Portugal, Greece..).
• The ECB launched a long-term financing operation in December and February known as LTRO."

Mr Van Rompuy concluded with a few words on the next steps for the eurozone and the European economy. 

1. Fiscal Treaty (Budgetary Treaty)

Ratification will be difficult in more than one Member State of the 25, but, as in the past, we will overcome these difficulties (think of the EFSF ratification). Moreover, unanimity is not needed for the Treaty to enter into force. The Treaty is becoming part of an ideological debate between the Left and the Right. This is a pity, since it was designed as part of our overall strategy and makes most sense in this context. Indeed, since the sovereign debt crisis erupted two years ago, we have dealt with it all along by moving forward on two parallel fronts: responsibility and solidarity. 

On the one hand enhancing the responsibility of individual countries. On the other giving concrete form to the solidarity that each has towards the whole. The Fiscal Treaty is a major step towards more responsibility, just like, for instance, the Treaty on the European Stability Mechanism is a major step towards more solidarity. You should not forget this bigger picture.

2. The other upcoming eurozone topic is the ceiling of the ESM rescue fund

If all goes well, this problem will be tackled by the Finance Ministers, not by the Heads of State and Government. It is another sign that we are in calmer waters. The end of the sequence of "Summits of Truth"! The European Council, as the Union’s "crisis body" takes a moment to rest... 

3. Going from short-term to long-term, a word on the Growth agenda

Structural economic growth is needed: to overcome the crisis, to maintain our welfare states (even if reformed) and our standard of living, to defend Europe's role in the world. Growth policies depend in large part on actions by Member States. The adjustment programmes, even though they are painful in the short run (and we see that every day), provide the foundations for future growth. While challenges differ across countries, there is an underlying pattern: we need to work more, longer and better. (It is like the Olympics: citius, altius, fortius!)

But some of the work we can only do together, as a Union. Economic growth has remained and is on the forefront of our action and the ultimate goal. As far as structural growth is concerned, we have to exploit the full potential of the internal market. For instance in services, the digital market or the energy markets. We are also working on reorientating structural funds to foster growth and employment.

The European Union has now stronger tools to trigger structural reforms than ever before. At the June European Council, leaders will endorse the so-called country-specific recommendations (adopted by the Council following a proposition by the Commission). We will also discuss reform commitments taken by leaders under the Euro Plus Pact. Everybody will have homework to do, and not only the countries under programme or market pressure.

In the field of growth, on the short term also, there are positive signs, not only in this country but also for instance in Germany and elsewhere. One should not put to much weight on monthly movements of economic indicators, yet there is a clear tendency for business and consumer confidence to rebound, even if it may be too modest. 

It is good to see that the turning point in the crisis and the overall positive tendency in Europe are also acknowledged by our international partners in Washington and beyond.

We are not the only continent facing an adaptation of their growth models. This is clearly the case in China, in the United States, in India. Europe will come out of this crisis stronger and more united, as has happened in the past. The Union and the euro are irreversible projects.

The European continent has all the assets to remain a great place to live and work: as the most prosperous, the freest and the most stable part of the world.

Full speech

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