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19 May 2010

Commissioner Rehn: Reinforce both the preventive and the corrective arms of the SGP


Rehn underlined that stronger fiscal surveillance should be accompanied with broader macroeconomic surveillance. The essential cornerstone of reinforcing economic governance is to coordinate fiscal policy in advance, he said. The Commission will propose a more permanent mechanism in due course.

Speaking at the plenary session in Strasbourg, European Commissioner for Economic and Monetary Policy Olli Rehn underlined that a faster reduction of the public deficit is an essential component of the financial stability package that was agreed on the 10th May.
The Commission presented an ambitious set of proposals to reinforce economic governance in Europe. There is a need to strengthen preventive budgetary surveillance, address macro-economic imbalances and set-up a permanent and robust framework for crisis management. He counts on the Parliament's support for these proposals. They are at heart of making Europe 2020 a success in the coming years.
The Commission proposals are based on two principles: First, prevention is always better than correction – not to speak of letting it escalate into a crisis. Second, stronger fiscal surveillance should be accompanied with broader macroeconomic surveillance, to go to the roots of sustainable growth.
The EC proposals are made of three building blocks.
·         First, reinforce both the preventive and the corrective arms of the SGP. The essential cornerstone of reinforcing economic governance is to coordinate fiscal policy in advance, in order to ensure that national budgets are consistent with the jointly agreed European policies and obligations, so that they don't put at risk the stability of the euro-area as a whole and/or that of the other member states.
·         Second, go beyond sheer budgetary surveillance, to broaden and deepen surveillance to address macroeconomic imbalances.
·         Third, to be very clear to whoever is watching the euro-area: never be defeated. To discourage anyone from even trying our vigour, we need a permanent and robust framework for crisis management for the euro-area member states. The temporary mechanism established on 9 May is a bold first step to that direction. But for the medium-to-long term, the Commission will propose a more permanent mechanism, subject to strict policy conditionality, and drawing on the lessons of the recent experience.
He concluded by saying that “The Commission's initiatives, once adopted, will lead to a substantial deepening of economic governance in Europe, and to a prudent widening of the euro-area.  Indeed, in the E.M.U, it is high time to fill the E with life!”
 


© European Commission


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