31 May 2013

Speech by the Eurogroup President at Eliamep in Greece

Dijsselbloem said that the key priority was to ensure that the improved fiscal position in Greece was sustainable in the long term by tackling the imbalances in the economy which had made Greece, as other eurozone countries, vulnerable to the global financial crisis.

Eliamep = The Hellenic Foundation for European and Foreign Policy

The Greek economy, as that of other countries in the eurozone, is forecast to return to growth at the beginning of 2014:

• Confidence is returning. This is supported by the achievement of fiscal targets; the credibility of recently legislated reforms; and by strong improvements in Greece's cost competitiveness.  
• The banking sector is strengthening as deposits and liquidity return, following EU/IMF disbursements and Greece's debt reducing measures. 
• The rebalancing of the economy towards export-oriented growth has begun and, as a result of improved competitiveness, net exports are expected to be positive this year.  
• Measures designed to cut red tape and definitively end closed markets and professions are starting to bed-in and the business environment is improving. As your Prime Minister said to me today: to roll out the red carpet and clear out red tape. 
• Market sentiment is more positive. For example Fitch recently upgraded Greece to B minus. Spreads on Greek bonds are decreasing.  

The euro area cannot provide the answers to all individual problems. But eurozone Member States can, by working together, take measures to improve access to the labour market and improve competitiveness. Europe supports programs to create new job opportunities for the young. The EU Structural Funds can also help underpin continued investment in infrastructure and social services.  

The euro area has a clear strategy in this regard, although it will always need to take into account the circumstances in individual countries and sometimes be adjusted.

First, we must continue, in a sensible way, fiscal consolidation that will enable us all to get our public finances back on a sustainable footing. High debt levels cause costs of borrowing to rise, they stand in the way of productive investments, they prevent spending on education. We have a duty not to put a heavy burden on future generations with enormous public debts, and to bring public finances under control in all eurozone countries. Let me stress this point. Tax reform is about fairness. Lack of fairness undermines the tax morale, and confidence in our common institutions. Strong resolve is needed. This is crucial to improve revenue collection, which will contribute to the achievement of fiscal targets.  

Secondly, the eurozone countries must tackle the root of the problems that led to the initial collapse of the financial sector. To do so we must push forward with the completion of a Banking Union. New capital requirement rules will make the financial sector better equipped to manage risks and absorb shocks. The recently agreed Single Supervisory Mechanism will ensure that we will finally have independent European checks and balances for banks. The next step is to finalise the instrument for direct recapitalisation of banks and hopefully we will reach political agreement in June. And at the same time agreement on bank resolution (the so-called Recovery and Resolution Directive): a set of clear rules on how to resolve banks. In this regard, we must make sure that those that aim to benefit from excessive risk taking, will also be those that bear the lion's share of the burden of a rescue. We hope to make significant progress before summer on these elements of the banking union.  

Thirdly, we must press ahead with the structural reforms needed to create new competitive strength and enhance growth. Europe has to become more competitive in the current global context. This implies improving education, better quality of public services, reforming the judicial system and stimulating the business environment. This is in the end how the jobs lost during the crisis will be replaced. So our structural reform agenda for all countries and especially for Greece must be about fostering entrepreneurship and innovation. European funds should be fully used to this purpose. The European Investment Bank is making even more funds available to extend credit to SMEs, so no business opportunities are missed.  

Full speech

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