EU’s Van Rompuy details finance ministers’ agreement

Oct 18 (BestGrowthStock) – European finance ministers and other
officials were attending talks in Luxembourg on Monday.

Following is the text of a statement released by Herman Van
Rompuy, the president of the European Council which represents
EU member states, after the meeting:

“Today, the European Union made a great step forward in the
European Union’s economic governance.

The package agreed by the Task force, when validated by the
European Council next week, will be the biggest reform of the
Economic and Monetary Union since the Euro was created.

The recommendations and concrete proposals contained in the
report of the Task force go in five directions.

“First direction: broader economic surveillance.

We recommend to create a mechanism for macro-economic
surveillance. This is in my view the biggest innovation. An
early warning system will detect the risk of real estate bubbles
or of unsustainable patterns on the balance of payments, or
strong divergences in competitiveness. These types of risks were
neglected in the first decade of the euro.

The crisis has shown that sound budgets are not enough to
guarantee sustainable economic growth.

That’s why we recommend this surveillance mechanism, as a
macro-economic pendant of the budget-focused Pact. Ultimately
this may result in sanctions for countries in the Eurozone only.

It will strengthen the economic pillar of the Economic and
Monetary Union.

“Second direction: greater fiscal discipline, a stronger
Stability and Growth Pact.

In earlier meetings, we had already agreed on the main
principles:

• A wider range of sanctions and measures, both financial
and political;

• More focus on the debt criterion, which used to be
disregarded;

• An adapted timing, with sanctions kicking in at an earlier
stage.

Today we also reached consensus on how to implement these
general principles. One element is the agreement on more
automaticity in the decision making. For the decision on all new
sanctions, the so-called reversed majority rule will apply: a
Commission recommendation on sanctions will be adopted unless a
qualified majority of Member States in the Council votes
against.

Two further remarks on the Pact.

Firstly, balanced budgets are not a goal in themselves. We
take these measures because fiscal sustainability creates
confidence and lays the basis for economic growth and jobs.

Secondly, the Task Force’s commitment to a stronger Pact was
high from the beginning to the end. I was impressed by the
determination of the Member-States to impose these
self-constraints on themselves. The full package now at the
table will make our Economic and Monetary Union more solid.

Third direction: the Task-Force recommends: deeper and
broader coordination, notably through the “European Semester”. I
will not go into this, because it was already decided and will
apply as of 2011. The Semester will increase the awareness that
the decisions of one, affect all.

Fourth direction: a more robust framework for crisis
management. The Task Force considers there is a need for a
credible crisis resolution framework for the euro area in the
medium term. It should be capable of addressing financial
distress and preventing contagion from one country to another. It
must avoid the moral hazard implicit in any ex-ante rescue
scheme. The precise features and operational means of such a
crisis mechanism will require further work.

Fifth and final direction: stronger institutions. At the
national level, the Task Force recommends the use or setting up
of public institutions or bodies to provide independent analysis
and forecasts on domestic fiscal policy matters.

Taken separately, some of these reforms may seem small
steps. Together, they are a major step forward.

This spring the European Union won the battle of the Euro.
We took far-reaching decisions under the pressure of events.
Today, without such pressure, we show the responsibility to draw
the right lessons from the crisis. These recommendations provide
a major response to a major challenge.

“Before concluding, it may be useful to open a wider
perspective on what these proposals aim for. The Euro has been
unique from the start: a monetary union with a decentralised
fiscal framework. Thanks to the single currency and the internal
market our Member States are deeply integrated (both the 16 and
the 27). The crisis has shown how deeply! Everybody discovered
that the decision of one Member States potentially affects all.
However, Member States are responsible for their own
fiscal and economic policies and they will remain so.

“All recommendations will allow us to much better deal with
this unique situation. Basically they all aim for one of two
things. On the one hand: making sure that each Member State
fully takes into account the impact of its economic and fiscal
decisions on its partners, and on the stability of European
Union as a whole. We achieve this with a mix of more intense
cooperation and stronger constraints.

On the other hand: strengthening the EU’s capacity to react
when policies in one Member State present a risk to the rest of
the Union. In short: helping each to behave responsibly, and
stepping in when irresponsible behaviour of one member affects
the ensemble.

“To conclude, a remark on the method and the way forward.
The recent crisis has sharpened our minds. We have been able to
make proposals which were unthinkable only a few months ago, and
to finish our report in October rather than December 2010, as
originally planned. In this respect, the Task Force has worked
like a pressure cooker.

“Everybody has contributed actively, the Commission, the
Central Bank and the Ministers of Finance. This has allowed us
to accelerate the process, thanks also to the close link with
the European Council. I have expressed my thanks to all Task
Force Members for their constructive approach.

“From here I shall go with the report to the European
Council to get the political backing of the Heads of State and
Government. I am confident that the regular legislative process
will then be able to translate our political agreement into
legislative form. These measures should be in place as quickly
as possible. It is our common duty.”

ENDS

For highlights of their comments, please click on
[ID:nLDE69H06K]

For a story previewing the talks, please click on
[ID:nLDE69H046]

(Brussels newsroom, +32 2 287 6830)

EU’s Van Rompuy details finance ministers’ agreement