By Olli Rehn, Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
President, Honourable Members,
Now as the legislation for reinforced economic governance, the so called six-pack, has entered into force yesterday, we must intensify its implementation. On the fiscal side, this is already a work in rapid progress. On the macro side, we need to move on as well. I therefore welcome your draft resolution on the envisaged design of the scoreboard for the surveillance of macroeconomic imbalances, and your questions.
Following your resolution tomorrow, and since the Commission already has received the views of the Council (ECOFIN 8th November) and the ESRB (9th November), we will now finalise the design of the scoreboard without any further delay, and in full respect of democratic principles.
The final scoreboard will become part of the Alert Mechanism Report (AMR), which is currently scheduled for adoption by mid-January. It will then be discussed in the Ecofin and Eurogroup in January/February.
Taking due account of these discussions, the Commission will launch in-depth reviews for the Member States for which they are needed. These in-depth reviews will analyse macroeconomic imbalances and provide the basis for any recommendations to be addressed to member states.
Let me underline the key difference between fiscal and macroeconomic surveillance, or between the Excessive Deficit Procedure and the Excessive Imbalance Procedure: both are preventive, but macroeconomic surveillance is even more preventive than the fiscal one, and as such indeed necessary for economic stability and fiscal sustainability. This we have seen, for instance, in the cases of Ireland and Spain: both had sound public finances prior to the crisis, but once the financial crisis hit with its full force, their serious macroeconomic imbalances led also to a very serious fiscal crisis, which then turned into a recession in the real economy and into high unemployment, with very serious social and human consequences.
Moreover, while fiscal surveillance is very numerical and quantifiable, macro surveillance requires a thorough economic reading and is much more qualitative. This means that when we propose countries for an in-depth study, it will not mean that they face an imminent crisis. Instead, it means that, for these countries, there is the risk of excessive imbalances, which, if confirmed, would need to be addressed effectively.
In other words, it serves as an essential early-warning system and as a call for pre-emptive action to correct the build-up of those imbalances.
And this brings me to further parts of your oral question, in particular to its equal application to all Member States.
The assessment of Member States’ current account balances is an important part of the economic analysis of the Alert Mechanism Report.
And here, the Commission stands fully by its declaration to the European Parliament on 28 September stating that “macroeconomic surveillance covers countries with current account deficits and surpluses with appropriate differentiation as regard the urgency of policy responses and the type of corrective actions required.”
With regard to the necessary recourses for the surveillance, the Commission has the required technical expertise. However, effective country surveillance is extremely labour and resource-intensive. The Commission is addressing the urgent resource constraints of DG ECFIN within the available limits. It is of paramount importance that adequate resources are available to ensure the high quality and required speed of the essential analyses, as well as communication and technical support, which are required for the smooth and sustainable functioning of EMU.
President, Honourable Members,
Let me also recall as well that all 27 Member States will be subject of the surveillance – thus all Member States will benefit of its findings, for their own good, and jointly as the European Union, for their common good.
I am certain that also the UK will want to participate in this work. We from our part want to, and indeed will, involve each and every Member State. The regulation applies to all, and we continue to work for the benefit of each and every Member State and all EU, even though that sometimes seems to be forgotten in the midst of the most heated debates.