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Keynote address by European Commission Vice President Günter Verheugen to the IEA
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"Doing business in the new economic climate"

Keynote address by

European Commission Vice President Günter Verheugen

to the Irish Institute for European Affairs (IEA)

Dublin, 26 February 2009

Ladies and Gentlemen,

•       Let me begin by thanking you for inviting me to meet you this morning. I strongly appreciate to speak to such an important political think tank such as the Institute of European Affairs and I am looking forward to having an in-depth discussion with you this morning.

•       Europe is facing the biggest financial and economic crisis fordecades. Analysis of my services has shown that manufacturing output declined by 8.2% in November 2008 compared to a year earlier. Construction was down by 4.2%. We do not yet see the full impact of this downturn on the labour market but we are certain to expect quite some bad news later this year.

•       How has Europe responded to the crisis so far? The first challenge was to stabilise financial markets in the fall of last year. This succeeded thanks to a co-ordinate European policy response. While financial markets are still not fully functioning, these measures prevented a collapse of the entire system. 

•       However, the financial crisis soon started to affect the real economy as well. In response to this the Commission put forward a European Economic Recovery Plan in November last year. This plan was agreed to by the EU's heads of States in December 2008.

•       The European Recovery Plan is based ontwo main, mutually reinforcing elements: short-term fiscal measures to boost demand and save jobs, but structural reforms that prepare the ground for higher growth in the long term.

•       The plan called for a timely, targeted and temporary fiscal stimulus of around €200 billion, or 1.5% of EU GDP. Our forecasts show that this stimulus will alleviate the impact of the crisis. It will, however, not be sufficient to deliver positive growth in 2009. We only expect growth to occur in 2010. Nonetheless, the stimulus will significantly slow down the downward economic spiral and prepare the ground for future growth.

•       It will be crucial to ensure that the implementation of the fiscal stimulus is speedy and non-bureaucratic. Therefore, the Commission has recently changed the rules for public procurement to allow for such a swift implementation.

•       The main objective of the European Recovery Plan is to provide a co-ordinated policy response across the EU. Co-ordinated does not mean uniform, of course. Every Member State will have to tailor its measures to national needs and circumstances. But without co-ordination, Member States would only do what they perceive to be in their own best interest without taking into account the effects on its neighbours. Such an approach would be short-sighted to say the least.

•       Let me elaborate a bit on this last point: we are seeing some worrying signs of protectionism both within and outside the EU. Everybody knows the lessons of the 1930s and we must not repeat the mistakes made back then. It is one of Europe’s greatest achievements to have overcome economic nationalism and to have scrapped tariffs and other trade restrictions to create the biggest single market in the world. We should not return to such ideas now when they are less justified than ever.

•       The fiscal stimuli called for in the European Recovery plan has to respect the different fiscal starting positions of Member States. We have to be aware that in some Member States the fiscal room for manoeuvre is limited and should not be wasted. The money must be used to the best effect, supporting the necessary structural reforms, and speeding up the EU's move towards a knowledge-based low carbon economy.

•       Here I would like to focus on one item from that plan which is close to my heart. I believe that it is now more important than ever to fully exploit the growth potential of small and medium-sized enterprises. SMEs make up 99% of all European enterprises and if we enhance their competitiveness, we can significantly enhance the growth potential of the EU economy.

•       However, it is not sufficient simply to do more for SMEs. We really need a political commitment that the concerns of SMEs are firmly placed at the centre of political decision-making.

•       For this we now have a European "Small Business Act”. The SBA is designed to ensure that the "think small first" principle is firmly anchored across the European Union – from local authorities all the way up to the European level.

•       In parallel, we have proposed in the Small Business Act a number of new legislative measures. For instance, we propose rules for reduced VAT rates in certain labour-intensive sectors. And we have reworked our state aid rules to give national and regional authorities more flexibilities to grant non-distorting state aid.

•       Furthermore, we have engaged in an extensive exercise to reduce administrative burden for SME's and to simplify decision making. In fact, measures already presented or announced by the Commission represent savings in excess of €30 billion. These significant financial and time savings for European enterprises are particularly important in the context of the current economic downturn. This also means that we are well on track to reach our ambitious target to reduce administrative burdens by 25 % in 2012.

•       Let me conclude by giving you a brief outlook of what is ahead of us: the financial and economic crisis is far from being over. We are only about to start to address the most difficult part of the crisis – the regulation of the financial sector. The meeting in Berlin last weekend of European leaders was an important signal towards a common framework of regulating this sector. This is encouraging but much more work on the tricky details will need to be done.  The upcoming G-20 meeting in London will hopefully achieve international agreement on core pillars for a future regulation of the financial sector.

•       If the financial and economic crisis has shown one thing then it is that European integrationoffers a high value for European citizens: without a functioning single market, without a stable EURO, without a co-ordination of policy responses in fiscal and financial matters, Europe would be much worse off these days!

•       Thank you for your attention.

Last update: 30/10/2010  |Top