Remarks by Executive Vice-President Dombrovskis at the press conference on the review of EU economic governance and the launch of a debate on its future - EU monitor

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Dinsdag 24 november 2020
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Remarks by Executive Vice-President Dombrovskis at the press conference on the review of EU economic governance and the launch of a debate on its future

Met dank overgenomen van Europese Commissie (EC) i, gepubliceerd op woensdag 5 februari 2020.

I would like to start today by taking you back to 1992. That's when the Maastricht Treaty established the Economic and Monetary Union and the now-famous 3% and 60% rules that you're all familiar with.

It was clear already back then that coordination of our economic and fiscal policies would be crucial to ensure a stable euro. So five years later, in 1997, the Stability and Growth Pact was created.

Of course, the economic governance framework has evolved considerably over the years in response to changing economic conditions. The most recent adjustments were made following the financial crisis, with the introduction of the 6-pack and 2-pack.

We learned some lessons the hard way, and adjusted our rules accordingly. We learned, for instance, that sound fiscal policy in good economic times is important to create buffers for when things get bumpy. We learned that public debt matters and that, beyond fiscal policies, economic imbalances are also relevant.

One decade on, we're taking stock of whether our framework has effectively delivered on its objectives.

Let's start with the positives, and there are many: Public finances are in much better shape. Public debt is going down. No Member State is now subject to the corrective arm of the Stability and Growth Pact, or Excessive Deficit Procedure - compared with 24 Member States in 2011.

Our shared fiscal rules have played a positive role in ensuring financial stability, which is a precondition for sustainable economic growth and job creation. The European economy has experienced seven years of consecutive growth and is forecast to continue expanding this year and next. And there's now greater economic convergence among Member States.

But we also need to be honest and reflect on the negatives. Public debt in some Member States remains very high. Fiscal policies have generally not helped to smoothen the economic cycle. The reduction of economic imbalances has slowed down, while external debt remains high and current account surpluses persist in some countries. And we see ‘reform fatigue' setting in.

And last but not least, our rules have become overly complex and harder to explain.

So today we're starting an open debate that will give all interested parties the chance to give their views on ways to strengthen the framework's implementation and effectiveness.

In that, the sustainability of public finances remains key. It might not sound exciting. But this is the bedrock on which we can build everything else. Debt levels need to be sustainable to create an environment that is conducive to investment and growth.

But we should also take into account the changed economic context - with low growth, low inflation, low interest rates, and low reform momentum. And factor in two urgent challenges: to make Europe the first climate-neutral continent and the one that is fit for digital age. And we know that this will require massive investments.

We need to reflect carefully on exactly what role our fiscal surveillance rules can play in supporting these transitions.

In fact, we have a wide range of tools in our arsenal to finance the greening of our economy - such the Green Deal Investment Plan adopted recently, the EU budget mainstreaming sustainability in the EU budget, or promoting investments thanks to green or sustainable finance rules. In addition, of course, we need to carry out structural reforms to transform our economies.

We know that discussions on how best to enhance our rules will not be easy. Discussions in the past have amply shown that. However, it is a joint responsibility to make our rules work. I therefore hope we can arrive at a high degree of consensus among Member States, European institutions and other stakeholders. Ownership and trust is crucial for any framework to be effective.

We look forward to a fruitful and open debate We will consider all the views expressed and complete by the end of this year our reflections on the scope for any possible future steps.