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A European agenda
Think of the eurozone as an apartment complex. We, the owners’ association, have restructured the foundation, rewired the building and enforced the walls. But to make the renewed building a success, everyone should improve the inside of their own apartment. In short: we have achieved much at the central EU and euro area level, but this cannot solve all problems.
The focus should now be on promoting structural change at the Member State level, because the areas where reforms are needed belong mostly to the national domain. Diversity between Member States has always been Europe’s strength. It reflects the different preferences of voters and encourages innovation through competition. This diversity enables us to learn from each other. The European Commission can play the role of facilitator in this process.
I therefore propose to further strengthen peer review in the area of structural reforms, both in scope and in political commitment within the European Semester. We should enter into this process offensively. We should try to learn from each other in a positive way. Where useful, this can be supported by mutual technical assistance. We should enlist the advice of international institutions. Their insights can be useful to identify bottlenecks and design appropriate policies.
However, this process cannot become too informal. Given the strong interdependencies in the euro area, we should not be afraid to remind each other of our responsibilities. Coordinated action between Member States can also be instrumental in overcoming vested interests.
The agenda should be based on more than just peer review and peer pressure. In general we need to focus European economic governance not only on budgetary targets, but also on the completion of meaningful reforms. For instance, the European budgetary rules allow for an extension in bad economic times. This leniency is now granted without any conditions. In future cases, I propose to link deviation of fiscal targets in the Stability and Growth Pact to the concrete achievement of reforms. In other words only if a country pushes forward crucial reforms can the deadline for fiscal targets be extended. Softening of fiscal targets should be tied more concretely to completion of reforms.
Lastly, I would like to see a clearer link between the expenditure from the European budget and loans from the European Investment Bank on the one hand and the implementation of structural reforms by member states on the other. A country growth strategy, modelled after World Bank practice, would be a suitable tool for this.
Conclusion
In conclusion I would like to affirm that the two challenges I mentioned – restoring growth and preserving the European social model – cannot be seen separately. In fact, I see them as mutually reinforcing.
Economic growth is essential for the affordability of social spending. Conversely, social protection is a cornerstone of how we in Europe organise our societies. This creates a stable environment for investing in the future. To achieve these twin goals, each Member State has the responsibility to contribute. Together this builds a stronger Europe.
See also: President of the Eurogroup Jeroen Dijsselbloem visits Spain