23 October 2012

President Barroso: Key Debate - Conclusions of the European Council meeting 17/18 October 2012

This is also a pre-condition for the direct recapitalisation of banks under the European Stability Mechanism. By reaching agreement on this, the EU has a huge opportunity to restore confidence, to demonstrate its capacity to take difficult decisions in times of crisis, and to send a message of stability. Let us not fail to seize this moment. And let us also be clear about one thing: Reaching agreement on these issues is a fundamental pre-condition if we want to be credible in our further deepening of EMU.

Regarding the Single Supervisory Mechanism for banks, without prejudice to the ongoing legislative process, the European Council confirmed many of the key principles on which the Commission proposals were grounded. That includes being as open as legally possible to all Member States who want to participate; proper accountability at the level at which decisions are taken - which for the Commission clearly means towards this Parliament; and maintaining the level playing field and the integrity of the single market.

It also includes the tasking of the ECB with responsibility for prudential supervision and the power to intervene, if needed, with any bank in the euro area. And a clear separation of this supervisory function and monetary policy. In all of these matters we will continue to work closely with the European Parliament.

An important element is the political commitment of the Heads of State and Government that agreement should be reached by the end of this year. Let's not forget why we are acting. We are advancing in our response to the crisis. We need to definitively break the negative link between bank debt and sovereign debt. This is urgent! That is why the Commission put its proposals on the table within weeks of the June European Council.

Delivering the single supervisory mechanism will give a very important signal to our citizens, our international partners and to investors in general. The European Council also spelt out the need for the rapid adoption of the provisions relating to the harmonisation of national resolution and deposit guarantee frameworks based on the Commission's legislative proposals on bank recovery and resolution and on national deposit guarantee schemes. It also called for the rapid conclusion of the single rule book, including agreement on the proposals on bank capital requirements On all these matters this House has a decisive role to play and the Commission will work closely with you in the coming weeks to move ahead quickly

Before I look at the other, longer-term, elements of deepening EMU let me start by underlining how crucial it is to finalise the legislation known as the "Two Pack". The prior coordination of national budgets is one important pillar of our crisis response. And it is in the interest of the European Parliament, I would assume, that we incorporate as many elements from the Fiscal Treaty as legally possible into the Community method. And this is what we are doing with the Two-Pack.

Now that the EU institutions and Member States have embarked on a reflection process which will cover all aspects of a deeper EMU, including issues of solidarity, I am hopeful that we can agree that the Two Pack goes ahead and not deal with other issues covered by the further deepening of the EMU. As far as these other aspects of EMU deepening are concerned, the Summit was an occasion for the Heads of State and Government to look in more depth at the issues on the basis of the interim report prepared by the President of the European Council, myself, the President of the European Central Bank and the President of the Eurogroup. I would like to underline the very useful contributions that the European Parliament and President Schulz have made to this report.

Allow me a specific word about the issue of fiscal capacity of an economic and monetary union. As I said already in the State of the Union address, to deliver lasting results, we need to develop a fully equipped Community economic governance, together with a genuine, credible Community fiscal capacity. This would complement our efforts for a stronger and more binding framework for the implementation of key economic policies, in particular in the euro area, as one important means to prevent imbalances.

While much has been done here, for instance through the six-pack and the Country-Specific Recommendations, further steps are crucial to combine specific conditions with specific incentives and to really make economic and monetary union sustainable. One interesting idea in this context is that of contractual arrangements between the Member States and the Commission. Such arrangements could underpin the commitments taken under the Country Specific Recommendations with specific support for their realisation. We must, however, be clear that this has nothing to do with the decisions on the next Multiannual Financial Framework which we will hopefully be able to take in the coming weeks.

We are designing a new system where more decisions will be taken at the EU level. We therefore need stronger accountability. Fixing the accountability at the level where the decisions are taken will be one of the fundamental principles which will guide our discussions on economic and monetary union. At the same time we need to make sure that more democracy means more transparency not more complexity. Our procedures are already complex enough. Institutions, mechanisms and procedures would make Europe more opaque, less readable and distance us from our citizens precisely at a time when we need to draw closer together.

And there are a few more key principles:

We need to build on the existing institutional and legal framework based on community treaties. We must support the deepening of integration in the euro area as the basis for strengthening our currency, the euro. We must ensure convergence between the existing and future euro area members. And we must respect the integrity of policies conducted at the level of currently 27, soon to be 28, in particular integrity of the Single Market.

Full speech

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