17.11.2011 Speech (in English) by Androulla Kaminara, Head of the European Commission Representation in Cyprus, at an event organized by the Representation of the European Commission in Cyprus on November 17, 2011 at the Turkish Cypriot Chamber of Commerce Hall. The European Union faces many challenges. But we will be able to overcome them. This crisis is a test of our willingness to act together.Intergovernmental cooperation is not enough to get us out of this crisis: it risks further renationalisation and fragmentation of Europe. That is why the European institutions were created in the first place. As I said before, we live in turbulent times where we either move forward together or we sink separately.
Ladies and gentlemen,
I would like to thank you for joining us here, at the Turkish Cypriot Chamber of Commerce, and I hope that we will have a fruitful dialogue.
Some of you maybe were present last December at Merit Hotel, where we talked about the EU's roadmap for stability and growth for the coming ten years. As a representation, we want to continue our effort to inform you, and also get your views, concerning the latest EU development. In my presentation today, I will pick up things from where we left them last year and I will touch upon three issues:
- The current challenges the European Union faces, as depicted by President Barroso in his ''State of the Union'' speech in September;
- Europe's response to the financial and sovereign debt crisis, the most important issue currently on the European agenda;
- and I will explain in general what it means for a Member State to hold the Presidency of the Council of the European Union. I will refer to the challenges and the criteria that determine a successful Presidency.
Let me begin with the challenges Europe faces.
Almost two months ago, President Barroso delivered his annual ''State of the Union'' address before the European Parliament. ''We are facing the greatest challenge in the history of our Union,'' the President said.
Indeed, the financial, economic and social crisis has resulted in a crisis of confidence and trust towards the EU by its citizens not seen in decades. Populist responses are putting into question the Union's greatest achievements, the euro, the single market and the free movement of people.
Yet there are solutions to the crisis. We can restore confidence and trust through united action. As the President said, ''the time for piecemeal solutions is over. If we do not go for further integration, we risk fragmentation. It is about political will. It is the test for our whole generation.''
Europe has already taken decisive action to tackle the financial and sovereign debt crisis. After all, this is one of those cases where we either move together or we sink separately. Before going through the EU's response to the financial and sovereign debt crisis, let me speak briefly about the European Union's external responsibilities, as described by President Barroso.
European action in the world is not only the best guarantee for our citizens and for the defence of our interests and our values: it is also indispensable to the world.
The rapidly-changing world needs a Europe that assumes its responsibilities. An influential Europe, a Europe of 27 - with the accession of Croatia soon to be 28. A Europe that continues to show the way, whether in matters of trade or of climate change. On the 28th of November, there will be a United Nations held meeting in Durban, South Africa. There, we hope to come up with a successor to the Kyoto Protocol, the decision we took some years ago to cut back on greenhouse gas emissions. Cutting back on emissions will help us to tackle climate change; emissions affect the planet-I think it is evident in the weather conditions, that in the last years are becoming more and more extreme. At a time when major events like that await us, Europe must retain its position of leadership on these questions.
Let us also turn our attention to our southern neighbours. The Arab Spring is a profound transformation which will have lasting consequences not only for those peoples but also for Europe. Europe should be proud. We were the first to stand alongside those Tunisians, Egyptians and Libyans who wanted democracy and freedom. Europe is supporting these legitimate aspirations, namely through our Partnership for Democracy and Shared Prosperity.
The Arab Spring should give hope for peace throughout the region. Europe wishes to see a Palestinian State living in peace alongside the State of Israel.
Finally, let us not forget the most deprived of all and let us live up to our commitments in attaining the Millennium Development Goals, which aim to tackle extreme poverty in the developing world.
Let me now turn to the EU's response to the financial crisis.
Three years ago, Lehman Brothers, a major US investment bank, collapsed, sending shockwaves to the global markets. This was the beginning of a financial and economic crisis, which we have tackled effectively by supporting the banking system and the real economy. The first lesson it taught us is how much interconnected the markets are, and how inefficient the rating agencies were in forecasting the problem. But now, this crisis has come to a new phase. It has transformed to a sovereign debt crisis.
The roots of the problems we are facing today are well-known. Europe has not met the challenges of competitiveness. Some of our Member States have lived beyond their means. Some behaviours in the financial markets have been irresponsible and inadmissible. We have allowed imbalances between our Member States to grow, particularly in the euro area.
Crisis management in the European Union may have given the impression of a rather belated, piece-meal and not well communicated affair. It is true that the decision-making process of 27 member states and 27 different election cycles is a complex structure. Still, what we have achieved in managing the current crisis is significant - though by no means enough.
The most challenging area for us has been the handling of the sovereign debt crisis. But we still have been able to reach a number of important decisions to contain the crisis.
More specifically, in May 2010 the EU set up an ad-hoc instrument to offer financial assistance to Greece, a country that had lost access to the markets. The package, with the participation of the International Monetary Fund, totalled €110 bil and would run over a period of 7.5 years.
At the Euro Summit that took place on October 26, it was decided that a new EU-IMF multiannual programme for Greece financing up to €100 bn will be put in place by the end of the year. Moreover, private investors will also share the burden; a 50% voluntary write-down on the Greek debt held by the private sector was decided.
At this point, I want to note that the news coming from Greece have been very encouranging. It is interesting that in the vote of confidence in the parliament, the new government received more votes compare to any other government in the past. The agreement to form a government of national unity opens a new chapter for the country. The European Commission has long stressed the need for a broad political consensus around measures to lift Greece out of this deep economic crisis.
To better safeguard our common currency, two more financial instruments have been created: the European Financial Stability Mechanism and the European Financial Stability Fund. The goals of the two funds is to provide financial assistance to euro area Member States. They have a combined lending capacity of €500 bn, and they support the programmes of Ireland and Portugal- the two other Eurozone countries that have lost access to the markets.
To address market concerns that the firepower of these funds may not be enough, should other Euro members require assistance, the Euro Summit at the 26 of October decided to enhance the lending capacity of the European Financial Stability Fund; it is foreseen that it could be up to €1 tril.
While the "fire fighting" has been going on almost without interruption for the past one and a half years, we have embarked on reforms which will contribute to financial stability over the longer term.
One year ago, in September 2010, the European Commission presented proposals aiming to reinforce our economic governance and prevent having to deal with ''another Greece''. I am happy to note that following deliberations with the European Parliament and the Council, these legal texts were approved by the Economic and Financial Affairs Council on November 8th.
The measures have two goals:
• First, to enhance budgetary discipline under the EU's Stability and Growth Pact. The Stability and Growth Pact, or SGP, is our tool to safeguard the stability of the euro. It maintains that euro area members should have a budget deficit below 3% of GDP and public debt below 60% of GDP. However, in order to tackle the financial crisis and support the economy, euro zone Member States pushed their deficits and public debts up. The enhanced budgetary discipline approved last month will ensure a satisfactory decline of public debt in the member states, as well as a decrease of high deficits to be followed by achieving ambitious, country-specific medium-term budgetary objectives.
• and second, to broaden the surveillance of the member states' economic policies, so as to cater adequately for macroeconomic imbalances.
To achieve a better ''monitoring'' of the Member States' public finances, that will allow us to prevent deviations, the European Commission adopted, and kicked off in 2011, the so called European Semester.
The European semester is a six-month period each year when Member States' budgetary, macro-economic and structural policies are coordinated effectively. This allows Member States to take EU considerations into account at an early stage of their national budgetary processes and in other aspects of economic policymaking.
The key stages in the European semester are as follows:
In January, the Commission issues its Annual Growth Survey, which sets out EU priorities for the coming year to boost growth and job creation.
In March, EU Heads of State and Government issue EU guidance for national policies on the basis of the Annual Growth Survey.
In April, Member States submit their plans for sound public finances (Stability or Convergence Programmes) and reforms and measures to make progress towards smart, sustainable and inclusive growth (National Reform Programmes).
In June, the Commission assesses these programmes and provides country-specific recommendations as appropriate. The Council discusses and the European Council endorses the recommendations.
Finally, end of June or in early July, the Council formally adopts the country-specific recommendations.
This process allows the Commission to identify structural problems or issues related to the public finances, and make recommendations that the Member State can take on board at an early stage.
Ladies and gentlemen,
We are not yet out of the woods. The economic outlook for Europe is still challenging. In its six-month forecast on the course of the economy released last Thursday, the European Commission warned that the economic recovery has come to a critical point. A stagnation of GDP is now expected in the current and coming quarters. Since the summer, the outlook has taken a turn for the worse. The sovereign-debt crisis in euro-area Member States has spread, debt sustainability in advanced economies outside the EU has also moved into investors' focus, and the global economy has lost steam. Firms are expected to postpone or cancel investment as the growth outlook has darkened amid increased uncertainty.
The bright side is that the Member States' public finances continue to gradually improve. Fiscal deficit outcomes for 2011 are now projected at 4.7% of GDP in the EU and 4.1% in the euro area. For 2012, deficits are projected at 3.9% in the EU and 3.4% in the euro area. Just quickly to note that Cyprus' budget gap for 2011 is seen at 6.7% of GDP and for 2012 at 4.9% of GDP.
Given that the Euro has been under heavy fire as being responsible for the sovereign debt crisis, I would like to draw your attention to the fact the EU member state with the biggest budget deficit for 2011 is a state that voluntarily does not use the Euro: it's UK, with a budget gap estimated at 9.4%. The roots of the crisis do not lie in the Euro. They can be traced to the fiscal proliferation demonstrated by some member states. We should always keep in mind that fiscal consolidation and healthy public finances are the stepping stones for our growth.
There is a Chinese proverb saying that a crisis is an opportunity in disguise. The financial crisis has given us the opportunity to rethink where we want the EU to be in 10 years time. To ensure that the Union will continue to be in the forefront of progress and competitiveness, the European Commission has presented the ''Europe 2020'' strategy-the EU's growth strategy for the coming decade.
In order to compete with the US, China and India, the EU has to become a smart, sustainable and inclusive economy. These three mutually reinforcing priorities should help the EU and the Member States deliver high levels of employment, productivity and social cohesion.
Concretely, the Union has set five ambitious objectives - on employment, innovation, education, social inclusion and climate/energy - to be reached by 2020. Each Member State has adopted its own national targets in each of these areas. Concrete actions at EU and national levels underpin the strategy.
The 5 targets for the EU in 2020 are:
75% of the 20-64 year-olds to be employed
2. R&D / innovation
3% of the EU's GDP (public and private combined) to be invested in R&D/innovation
3. Climate change / energy
-greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than 1990
-20% of energy from renewables
-20% increase in energy efficiency
-Reducing school drop-out rates below 10%
-at least 40% of 30-34–year-olds completing third level education
5. Poverty / social exclusion
at least 20 million fewer people in or at risk of poverty and social exclusion
As said, each Member State has adopted its own national targets in each of these areas. The European Semester exercise offers us the opportunity to monitor the progress made by each Member State and make the appropriate recommendations.
At this point, I would like to go through the upcoming Presidency of the Council of the European Union during the second half of 2012 by Cyprus. The Cyprus' Presidency will have to exercise its duties in the same way the other EU Member States do. What I am going to mention are the generic, if I may say, competencies of any Presidency. Let me start by quickly explaining what a Council Presidency is.
The Council of the European Union, also known as the Council of Ministers, together with the European Parliament form the main decision-making bodies of the European Union.
It consists of the twenty seven national ministers whose portfolio includes the topic being discussed. Overall there are ten different formations of the Council, covering a wide range of topics – from economy to transport .
The Presidency of the Council of the European Union, also known as “the Presidency”, is rotated between the member-states every six (6) months. The order in which the various countries will preside has been agreed up to the end of June 2020.
The country holding the Presidency is responsible for ensuring the smooth functioning of the Council of the European Union. It is in charge of the agenda of the Council and chairs all of the Council’s meetings, as well as those of the various Working Groups for the duration of its six-month term, with the exception of the sessions of the Foreign Affairs Council, which are coordinated by the High Representative of the Union for Foreign Affairs and Security Policy. It promotes all the legislative and policy decisions and ensures consensus between member-states is reached on the various issues. The country holding the Presidency assumes the role of the ''honest broker'' between Member States and between the EU Institutions.
I can assure you that this is not an easy task. And in my view, there are certain factors that can ''make or break'' a Presidency.
- Managing the EU's legislative agenda
- Managing unexpected events inside and outside the EU
- Managing logistics
- Managing communication
Let's see them one by one.
1) Managing the EU's legislative agenda
Cyprus is not on its own in setting priorities concerning the EU's legislative agenda for the period it will hold the Presidency. This takes place in cooperation with the countries holding the Presidency before and after Cyprus- Poland and Denmark. All three form the so-called Trio.
In order to enhance continuity in the work of the Presidency, the Treaty of Lisbon has stipulated that each three successive presidencies cooperate on the basis of a "triple-shared presidency", or Trio, over an eighteen month period.
Each of these three countries takes over the Presidency for a period of six months in accordance with a predetermined order, during which time they stay in constant touch with each other with the aim of effectively planning and implementing their joint 18-month programme covering specific priorities.
On the basis of this programme, each of the three Presiding countries prepares its own more detailed six-month programme. We have translated the 18 month programme in Turkish, and copies are available outside.
Through this new procedure, the Trio has as its main aim to ensure that the necessary continuity is achieved in the deliberations and policies of the EU.
In other words, this 18-month Presidency allows enough time for the Presiding countries to set targets that can be successfully implemented or towards which sufficient progress can be made.
Apart from the programme drawn up with Poland and Denmark, Cyprus will have to manage an inherited agenda- that is issues that will be concluded during its Presidency.
Some of the most important issues Cyprus will have to deal with, which just happened to fall on its six month Presidency, are are:
- The Multiannual Financial Framework. During the Cyprus Presidency, the negotiations concerning the Multiannual Financial Framework for the years 2014-2020 – that is, the total EU budget for this period- are expected to be concluded. The European Commission presented its proposals on this issue last June. Consultations are ongoing between institutions and negotiations should be completed at the end of 2012, ie during the Cypriot presidency.
On a matter of such importance – keep in mind that we are talking about the EU budget for a six year period, for an amount that may exceed €1 trillion - the role of Cyprus as a ''honest broker'' may determine the outcome the negotiations.
Let me clear at this point that the role of the country holding the Presidency is to promote the EU agenda, not its national agenda. It is extremely difficult for a member-state to hijack the 6 month Presidency so as to set and implement its own priorities. Chances are that it will fail-and it will also fail in holding a successful Presidency.
- 2012 marks 20 years following the creation of the Single Market. To give new impetus to this important policy of the Union, the European Commission adopted in April a set of twelve actions that touch upon all aspects of the Single Market and which will be completed by the end of 2012. Many of these actions will need to be completed during the Cyprus Presidency.
- Moreover, the issue of capital adequacy of banks may be rolled over to Cyprus. The European Commission recently presented its proposals on the matter, which require banks to hold more capital so that they can be better prepared to take potential losses without turning to taxpayers' money. If no agreement on this issue is reached during the Danish Presidency in the first half of 2012, Cyprus will be called to manage this issue.
All these issues mentioned are known, meaning that they are on the agenda and one may prepare himself to deal with them. But Cyprus, like every other Presidency, should be prepared to manage unexpected events- inside and outside the Union.
Let's take Hungary for example, the country that held the Presidency during the first half of 2011.
When preparing for their Presidency, the Hungarians could not imagine that the Arab world would rise up, that a tsunami would take a devastating hit to Japan or that the euro area debt crisis would take a turn for the worst.
Such developments are impossible to predict.
Still, these are the issues that dominated the agenda of the European Union for the first six months of 2011. And these are the issues Hungary had to respond to in order to have a successful Presidency.
In many cases, the Presidency has to adapt to reality and actuality. This may require a drastic redesign of the original schedule. This is something that we should keep in mind.
A third factor for a successful presidency is the logistics. As I said before, it is estimated that about 200 high-level meetings and many more events will take place in Cyprus during the second half of 2012. At the same time, if I am not mistaken, in Brussels, Luxembourg and elsewhere, there will be approximately 2000 high-level meetings linked to the Presidency.
For the successful conduct of these meetings, the logistics, the practical details are critical. This applies to events taking place here and abroad.
The fourth factor is related to the management of communication at four levels: local, international, Brussels and other Member States. Sometimes there is a communication gap in the European Union. It is up to Cyprus to best communicate the major issues and the 'achievements'. This should be done at four levels: locally, that is in Cyprus, in Brussels, in other Member States but also internationally as well.
Ladies and gentlemen,
The European Union faces many challenges. But we will be able to overcome them. This crisis is a test of our willingness to act together.
Intergovernmental cooperation is not enough to get us out of this crisis: it risks further renationalisation and fragmentation of Europe. That is why the European institutions were created in the first place. As I said before, we live in turbulent times where we either move forward together or we sink separately.
Now we need to stand together and all make the case for what the European Union has achieved. We need to mobilize to give a new momentum to Europe: a European renewal.
I want to note that we have a new, revamped website. You can see the address at the slide. I encourage you to visit it and follow the latest developments-keep in mind that the site is also available in Turkish.
Thank you for your presence here. I would like now to hear your thoughts and suggestions.