Eurozone (2007) - European Central Bank (2006) (debate) 
President
The next item is the joint debate on
the report by Dariusz Rosati on behalf of the Committee for Economic and Monetary Affairs on the Eurozone annual report 2007 (2007/2143()INI) and
the report by Gay Mitchell on behalf of the Committee for Economic and Monetary Affairs on the European Central Bank's annual report for 2006.
I am very pleased to welcome the President of the Euro Group, the Luxembourg Prime Minister and Finance Minister Jean-Claude Juncker. I am also delighted to welcome the President of the European Central Bank, Jean-Claude Trichet to the European Parliament. Let me also extend a warm welcome to Commissioner Joaquín Almunia.
Dariusz Rosati
rapporteur. - Mr President, I am pleased to present the second ever report of the European Parliament in response to the Annual Report of the European Commission on the Eurozone. The Commission's report presents the economic situation in the Eurozone in 2007.
The results of the report are cause for satisfaction. The economic growth rate in the Eurozone rose to 2.7%, which is the best result since 2000, whilst unemployment fell to 7.6%, the lowest in 15 years. At the same time the Eurozone has become an increasing factor in stabilising the world economy.
This generally optimistic picture, however, should not conceal some negatives, and these are what we focus on in our report. Firstly, the rate of fiscal adaptation, particularly in countries with large budget deficits, is too slow, bearing in mind that the stability and growth pact obliges Member States to maintain as balanced a budget as possible in the medium term. That involves building up a budget surplus in good times to have a financial reserve for times of recession. In this context we are critical of the behaviour of some Member States who are not making use of the current period of growth to implement the necessary cuts in public spending.
Secondly, Parliament points out that the good average results for the whole of the Eurozone cover up substantial differences in the economic situation from one Member State to another. Of particular concern is the declining international competitiveness of some countries' economies, most frequently due to wage rises in excess of the increase in productivity.
Thirdly, we call for a continuation of the structural reforms required by the guidelines of the new Lisbon Strategy. We have to increase the speed at which the remaining barriers in the markets for goods and services are removed, and help further integration of the labour and financial markets, which will become an important element in the proper functioning of the Eurozone. We would like in particular to draw attention to the speedy implementation of the services directive, which has brought accelerated growth in labour productivity and cut inflation in the services sector. This is particularly important, as services make up 70% of the GDP in the Eurozone.
Fourthly, Parliament stresses the importance of further extending the Eurozone to strengthen economic and monetary union and the common currency. We are pleased at the decision to accept Cyprus and Malta into the Eurozone, and look forward to other states joining it in the not too distant future. We would like to point out that the process for ascertaining the readiness of countries applying for the Eurozone should be transparent and based on uniform criteria, whose economic rationale and political importance should be in no doubt.
In this regard we call upon the Commission and the Council to start a serious debate on the nominal convergence criteria.
Finally, I would like to emphasise the importance of good governance and intensified policy coordination in the Eurozone. We need this if we are to make full use of the opportunities provided by the common currency. I am pleased at the decision taken by the Euro group in April this year to adopt benchmarks for the fiscal policies of Member States. We expect the implementation of these decisions to be closely monitored. I would like to take this opportunity to assure Mr Juncker that in this matter he has the full support of Parliament.
I would also like to congratulate Commissioner Almunia on preparing the Commission's second report on the economic situation in the Eurozone and express the wish that the reports prepared in coming years bring just as good news as this one.
Gay Mitchell 
rapporteur. - Mr President, I am happy for this report to be debated jointly with the report on the eurozone. I would add that the report I am presenting was adopted unanimously by the Committee on Economic and Monetary Affairs.
Starting with the economic situation, in 2006 the economic recovery in the eurozone became a self-sustaining process with domestic demand acting as the main driver. Two million jobs were created in 2006 and unemployment fell from 8.4% to 7.6%. In the context of this recovery, I would like to stress the main points of the report. Against the background of the recent recovery, any further raising of interest rates should be undertaken with caution in order not to endanger economic growth. It is crucial that wages increase in line with productivity in order to preserve competitiveness in Member States and to allow for job creation in a non-inflationary environment. Fiscal consolidation is key and all the more necessary in good times in order to achieve long-term growth.
The report observes that small economies have performed better than large economies since the creation of the eurozone in terms of growth, with notably Ireland, Finland, Greece, Luxembourg and Spain achieving a higher average growth rate than the eurozone average and we say that lessons might be drawn from such developments. The report expresses concern about the ongoing appreciation of the euro against most major European currencies. Article 111 of the Treaty assigns responsibility for exchange rate policy to the Council but without specifying how this responsibility should be exercised.
The report calls on the Eurogroup, the Council and the ECB to exercise their respective powers and responsibilities in full coordination. The report also calls on the ECB to monitor closely developments in the use of the euro as a reserve currency for central banks and, in the context of its annual report on the international role of the euro, to quantify and analyse the effects of this, particularly as regards exchange rates. Mr Trichet will be aware that every time he has appeared at Parliament's Economic and Monetary Affairs Committee during the last two years I have raised with him the issue of house prices. This remains a concern of mine. Therefore, the report calls for the ECB to monitor closely these developments, which have the potential to have consequences for the real economy. The report contains a request that the ECB present ways forward with their respective advantages, such as including real estate in the harmonised index of consumer prices or devising a specific type of indicator or suggesting specific measures to be taken at national level due to heterogeneities among the national markets.
I refer later on to the Fed formula. Perhaps it is time to develop an ECB formula to help forecast the likely effect of interest rate increases on house prices. My report also raises the issue of sub-prime lending and suggests that lessons can be learned in the EU from the potential difficulties for the US economy of sub-prime lending.
I would like to take a moment to address an issue of particular concern to Ireland but which has potential interest for other eurozone members. Last year in Ireland house prices were forecast to increase by 9% by estate agents Hook and McDonald, by between 8% and 10% by Sherry Fitzgerald and by 7% by Friends First and IIB, while Allied Irish Banks forecast an increase of between 3% and 6%. The recent Irish Permanent tsb/ESRI index shows in fact that house prices fell by 2.1% between January and May 2007 and a further decline in Ireland is expected. Sub-prime lending - that is lending to poorer people, those with an irregular income stream or difficult history of meeting loans - is projected to grow to EUR 4 billion in Ireland this year. If the average loan was between EUR 200 000 and EUR 400 000, then between 10 000 and 20 000 such loans exist in Ireland alone. Sub-prime lenders are relatively new to the Irish market and generally charge about twice the going mortgage rate to 'compensate' - as they put it - lenders for higher risk. In one case a mortgage company operating in Ireland since 2005 has already repossessed 30 homes.
There are also signs of concern in Britain about sub-prime lending. It has been known for some time that there is a Fed formula in the United States. The Fed formula devised by the US Federal Reserve, according to one of its former economists, shows that typically, when house prices have been driven up for several years by low interest rates, when interest rates increase, prices begin to decline roughly 18 months to 2 years later. I believe that the ECB should follow this formula and develop an ECB formula because, at present, we are leaving it to people who are involved in the industry to make the forecasts, and they are the people - the financial institutions and others - who have most to gain.
The report urges the Commission to assess the quality of supervision and offshore location of hedge funds. It reiterates points made in the past about democratic scrutiny and the need to publish summary minutes. It draws attention to the fact that overdraft rates in the euro area vary from 7% to 13.5% and asks that the ECB evaluate this.
It ends by saying that the number of banknotes in circulation stood at 11.3 billion with a value of EUR 628.2 billion last year, but that it is concerned about the growth in the number of 50 euro, 100 euro and 500 euro banknotes. 500 euro banknotes alone have increased by 13.2%. My report, with the support of the Economic and Monetary Affairs Committee, raises the possibility of criminal activities in the use of these large banknotes and says that it requires further examination by the ECB. I hope Mr Trichet will be in a position to respond to this report and, in particular - not today, but perhaps over a certain period - to consider my suggestion about an ECB formula to equate with the Fed formula so that there can be a true and accurate measure of the likely knock-on effect of interest rate increases on house prices in the Member States of the eurozone.
Jean-Claude Juncker
President of Eurogroup. - (FR) Mr President, Commissioner, Mr President of the European Central Bank, Madam President of the committee, rapporteurs, ladies and gentlemen,
We, in Europe, have replaced the fundamental debate with simple words. We are invited to Parliament - I hardly ever see it - to the plenary, as it is called, and we talk, I note, of the everyday living conditions of Europeans, something that undoubtedly enhances the credibility of our institutions.
European newspapers, especially this week's, report the words that were supposedly exchanged, during a recent Eurogroup, with an evening visitor whom we had the pleasure of hosting. I have read a summary of these long debates in editorials that take up scarcely 25 lines, and we complain that Europeans are poorly informed of what is really going on in Europe! So be it.
On the other hand, I am pleased to note that, one or two nuances aside, there is very little difference between the substance of the report by our friend, Mr Rosati, and our, the Eurogroup's, joint consideration, since our joint finding is that growth in Europe is on the up again, is expanding, is continuing, and everything rests on our knowing whether, in a few months' time, we will be able to see whether or not this prolonged recovery, this renewed growth in Europe, will enable us to say that the growth potential of the European Union, and of the eurozone in particular, has substantially increased. We are agreed in our finding that the levels of underemployment, of unemployment, are going down. We have had the lowest unemployment level for a very long time now. There is no doubt about that. The fact remains, however, that it must be stressed that the European Union, which is meant to be a model for the world but which still has an employment rate that is structurally higher than 7%, has no reason to seek plaudits from others or to proclaim itself victorious over the phenomenon of unemployment on our continent.
The deficits are decreasing. We saw a distinct upturn in the situation of Europe's public finances during the period 2005-2006. That is true above all where the deficit is concerned. Its level of 2.5 in 2005 decreased to 1.6 in 2006, which clearly proves that the corrective arm of the reformed Stability and Growth Pact has proven itself, and this, despite all the generally poor warnings that were given to us when we amended the Pact.
It is true that, where the preventive arm of the Pact is concerned, we struggle to produce the same successes that we have been able to produce with the recovery of public finances in its corrective part. We, the members of the Eurogroup - there are 13 of us now and there will be 15 of us as from 1 January - remain committed to the effectiveness of the policies that must be implemented in order to make the preventive arm of the Pact really develop, really take off.
When the economy is going well, when growth rates provide so many grounds for satisfaction, when economic growth gets back on track, it is clear that those times - which, in Franglais, we call good times - must be turned to good account, so that the structural deficits in our public finances can be brought down. Hence the huge importance that we accord to achieving the medium-term objective quickly, something that requires Member States of the eurozone to redouble their efforts in order to achieve their medium-term objective in time.
It will not have escaped you that, on this point, the informal Eurogroup that was held in Berlin on 20 April took a decision that involves a commitment being made, since we said that all the Member States should meet the medium-term objective in 2008 and 2009. Some of them managed to delay this until 2010, without having their cases clarified. There was never a question of not meeting the objective until 2012. This was, of course, the main topic of discussion when, recently, at the start of the week, we met the French President, who came - and we ought to welcome this - to explain to us, at Eurogroup, the new headings and the new aims of France's economic and budgetary policy. We approve heartily of the set of reforms under way, because they are structural reforms sought by the French Government and by the French President, but we would emphasise that which we expect and demand from France: like the other Member States of the eurozone, it must meet the medium-term objective that we have set ourselves on 1 January 2010. This is a remark that applies to France; it may easily apply to countries farther south and, in an ecumenical way, to all the Member States of the eurozone. However, we have been given reassurances regarding a reduction in the deficit in 2008, as compared with 2007, regarding the principle, which has been accepted by the French authorities, of allocating all the profits from revenue made in relation to budget estimates, in so far as the revenue is short-term revenue, and regarding the reduction in the deficit and the debt.
We all believe, since this is a subject that is brought up by the press, both in France and across the border into Germany - we are, after all, in Strasbourg - that no countries tried, in any working language of the European Union, last Monday, in the setting of Eurogroup, to call into question the independence of the European Central Bank. Moreover, if someone were to take the liberty of doing so, it would not be enough for them to be expressive in voicing a misguided thought, for respect must still be shown for the Treaties. We wanted an independent Central Bank; we have an independent Central Bank. It will, of course, remain an independent central monetary authority.
(Applause)
The strength of the euro is another subject that gives rise to debate. However, we do not see the ministers of Eurogroup, under the present circumstances - today, even - claim that a strong euro is liable to jeopardise economic growth in the eurozone. Rather, we believe that the Member States that are uneasy about this strength of the European currency in relation to the outside - strength that reflects the robustness of Europe's economic recovery - should ensure, within their countries, by introducing the necessary structural reforms, that their national economic systems, that is to say, their systems under the eurozone, become more competitive.
I was sensitive to the remarks made by your rapporteur in his report on the derailing of certain elements of wage policy. A large number of company managers are being granted allowances that in no way correspond to the appeals made again and again, both by the Bank and by Eurogroup, for a wage moderation policy that is understood properly, that is, for wage moderation that keeps up with the pace of the increase in productivity. We ought not to be surprised that European workers can no longer get to grips with a Europe in which some people earn a fortune without working, when one sees the volume of work that that requires, and the others have to resign themselves to accepting this, to being subjected to the appeals that we launch to them to encourage them to support wage moderation. (Applause) It is economic and social injustice that is now taking hold. We must react to it.
I agree with your rapporteur that, when viewed from the outside, the economic zone must be represented as being more solid, more of a single entity, but I cannot say that I understood the full scope of his ambition, when he advocates a single representation of the eurozone internationally.
In spite of his qualities, Mr Trichet will not succeed in making me withdraw from the European scene. I am here, and here to stay. And, as far as I am concerned, I have no ambition, no vague desire, that is driving me to force the other Jean-Claude to step down. Which one of us, moreover, could have the idea of eliminating the Commission from the external representation of the eurozone? The eurozone may be represented externally by one party, even if there are three of us, provided that there is an agreement among the three partners representing the eurozone externally. That agreement exists. It will have escaped no one that, on the key points of monetary policy, be it internal or external policy, we share exactly the same ideas and convictions.
I have restricted my remarks to the key points, Mr President, because that is what is asked of us by your Rules of Procedure, which I find particularly strict when the aim is to talk more vividly about the crucial and, as Parliament often says, everyday, problems of Europeans.
Jean-Claude Trichet
Mr President, ladies and gentlemen, I have the honour of presenting to you today the annual report of the European Central Bank for 2006. This is an important tool for giving an account to the people of Europe, to their elected representatives, to Parliament, of monetary policy and of our activities in our areas of responsibility.
ECB. - (DE) I would like to start by giving a short review of economic and monetary developments in 2006 and explaining the monetary policy decisions taken by the ECB. I would then like to say a few words on financial stability and on the issue of payment systems.
I will start with the economic and monetary issues. In 2006, the ECB's monetary policy continued to anchor medium- and long-term inflation expectations at levels consistent with price stability, reflecting the credibility of the ECB in conducting its monetary policy. As has been said by the rapporteur very eloquently, in 2006 the euro area economy expanded at the highest growth rate since 2000. Notwithstanding the impact of high and volatile oil prices, real GDP rose by 2.9% compared with 1.5% in 2005. The economic recovery gradually broadened in the course of 2006, and the nature of economic expansion became increasingly self-sustaining, with domestic demand acting as the main driver. The latest data and survey releases have remained broadly positive, supporting the view that economic activity in the euro area in the second quarter of 2007 continued to expand at solid rates. Looking ahead, the medium-term outlook for economic activity remains favourable and the conditions are in place for the euro area economy to continue to grow at a sustained rate.
Regarding price developments, average annual HICP inflation in 2006 was 2.2%, unchanged compared with the previous year. This was above the ECB's aim to keep inflation over the medium term below, but close to, 2%. Although this outcome mainly reflects the increases in oil and commodity prices and although inflation has been slightly below 2% in the first half of 2007, there is no room for complacency.
The outlook for price stability over the medium term remains subject to upside risks. As capacity utilisation in the euro area economy is high and labour markets are gradually improving, constraints are emerging which could lead in particular to stronger than expected wage developments. In addition, pricing power in market segments with low competition may increase in such an environment. Our assessment that upside risks to price stability prevailed has been confirmed throughout the period from the start of 2006 to mid-2007 by cross-checking with the monetary analysis. The marked dynamism of monetary and credit growth in 2006 and 2007 reflected a continued persistent upward trend in the underlying rate of monetary expansion, adding further to liquidity accumulation.
To address the upside risks to price stability identified by the ECB's economic and monetary analyses, the Governing Council has, as you know, adjusted the monetary policy stance gradually in eight steps since the end of 2005. As I said last Thursday in explaining the assessment of the Governing Council, after the adjustments in the key interest rates, the ECB's monetary policy remains still on the accommodative side, with overall financing conditions favourable, money and credit growth vigorous, and liquidity in the euro area ample. Firm and timely action continues to be warranted to ensure price stability over the medium term. The Governing Council will continue to monitor closely all developments in order to ensure that risks over the medium term do not materialise.
As regards fiscal policies, the ECB shares the view expressed in the draft resolution that fiscal consolidation is key and all the more necessary in good times in order to achieve long-term growth. For the Governing Council as was very eloquently said I have to say by both the rapporteur and by the President of the Eurogroup, it is important that all governments comply with the provisions of the Stability and Growth Pact on fiscal consolidation and that all the countries concerned honour the commitments made at the Eurogroup meeting in Berlin on 20 April 2007. As agreed in Berlin, taking advantage of the favourable cyclical conditions would enable most euro area countries to achieve their medium-term objectives in 2008 or 2009, and all of them should aim for 2010 at the latest.
I have to say that we also very much welcome the emphasis which has been placed by the ECOFIN Council on measures to improve the quality and efficiency of public finances.
Turning to structural policies, the motion for a resolution adopted by the ECON Committee refers several times to economic divergences in the euro area. Let me stress first that, overall, inflation differences among euro area countries have fallen and are currently relatively limited by historical standards. The magnitude of current inflation and output differentials at the moment I am speaking is similar to those that are observed across regions or states within the United States of America, a vast continental economy which has an order of magnitude, a dimension, which is of the order of magnitude of ours. That being said, a single currency means a single monetary policy and a single exchange rate vis-à-vis other currencies. It is therefore all the more important to ensure that all the national shock adjustment mechanisms function perfectly. The efficient and smooth functioning of economic adjustments within the euro area requires the removal of institutional barriers to flexible wage- and price-setting mechanisms as well as the completion of the Single Market and thus greater cross-border competition. Indeed, well-designed structural reforms implemented by national governments are crucial to improve the functioning of product, labour and financial markets and to reinforce competitiveness.
We also consider that free and undistorted competition fosters long-term economic growth and job creation and facilitates the maintenance of price stability in the euro area.
Let me say a word now on financial stability, which I know is a very important issue for Parliament. We would acknowledge the positive role that hedge funds play by contributing to enhancing the efficiency and liquidity of financial markets. We should also be aware, however, that hedge funds can represent also a source of risk to the stability of the financial system. Against this background, the report which was issued in May 2007 by the Financial Stability Forum at the request of the G8 on highly-leveraged institutions is welcome. The report contains a number of recommendations addressed to supervisors, hedge-fund counterparties and investors, and the hedge-fund industry itself, which I fully share. As for the role to be played by the industry, more than ever we will support the proposal that the hedge-fund sector would strive for best practices and that industry-led benchmarks would be a suitable tool to pursue this objective. In this vein, the recent initiative that has been undertaken by the industry to set up a working group to review best practices is a very welcome development and I look forward to the result of such work.
My final remarks perhaps concern the integration of payment systems in Europe. I have noted with satisfaction that the approach of the Single Euro Payments Area and the Target 2 project is very positive and we will continue in the Eurosystem to play our role in this regard.
As far as T2S is concerned, we have put into place a governance model for the development phase which seeks to involve all stakeholders through the creation of an Advisory Group on T2S where market players are well represented. In April 2007 we launched an official public consultation on the principles and proposals underlying the T2S Project. The first preliminary assessment of these comments shows that their feedback is generally positive. Out of 67 proposals, we have obtained a total of 3200 remarks from 56 institutions and we have noted that 60% of these 3200 remarks indicated full agreement to the proposals, while only 6% indicated full disagreement. All the feedback received has been published and is being very carefully considered.
Thank you very much for your attention.
Joaquín Almunia
Member of the Commission. (ES) Mr President, Mr President-in-Office of the Council, Mr President of the European Central Bank, ladies and gentlemen, I believe that it is very positive that, for the first time, we are holding this debate on the situation of the eurozone, which is the second we have held, following the first resulting from the first Commission report on the eurozone, and the report on the European Central Bank simultaneously, leading to an overall reflection on the situation of the eurozone, on the functioning of the Economic and Monetary Union and on the prospects for the future.
I must thank both Mr Rosati and Mr Mitchell for the wonderful reports they have presented to us and the Committee on Economic and Monetary Affairs for the work it has done in the debate on the proposals that we are currently discussing.
The proper functioning of the eurozone is a matter of crucial importance to our citizens. I must tell you from the outset, however, that I am worried that many European citizens, who carry and pay in euros every day, are not showing any great satisfaction with the single currency, at a time when the eurozone's economy is clearly recovering, when economic growth is above our potential - and above that of the United States - when the eurozone is enjoying a recovery, as Mr Trichet has said, based on internal demand, which was not the case a few years ago.
It is a recovery with investment that is growing in a very satisfactory manner and which heralds future improvements in our economy and with an economy that is helping to generate - in the case of last year - two million jobs in the countries of the eurozone. And all of this with a practically even trade balance, with an inflation rate currently below 2% and a stability that any of the world's economic areas would want.
I believe that everybody, the Commission, of course, but also the Council, and in particular the Eurogroup, the European Central Bank and the European Parliament, have the responsibility to explain to our citizens that this European project, eight years after its creation, is currently yielding very good results. I believe that this debate must serve to do that.
But it must also help us to learn from experience, to establish which elements of the Economic and Monetary Union are not functioning as we had imagined eight years ago, and to implement the adaptations and political decisions required in order to make the future better than the present, however positive the present may be. Following the Ecofin meeting yesterday, more Europeans are going to share in this positive present. Yesterday, Ecofin formally adopted the latest decisions required in order to confirm that the eurozone would be enlarged to include Malta and Cyprus on January 2008. On 1 January of this year it was enlarged to include Slovenia. Next year three new Member States will also have joined the Economic and Monetary Union, sharing the single currency with 318 million other Europeans.
I believe that that is a very positive element which was debated yesterday and agreed to everybody's satisfaction, not just by the 15 members of the eurozone, but also by the other 12 States that do not yet share the single currency, and I believe that that is worth stressing at this point.
With regard to the economic situation, I am not going to refer to it in detail, since both Mr Juncker and Mr Trichet have already done that.
With regard to the application of the Stability and Growth Pact, which I believe relates to this improvement in the economic situation and this economic stability that we are enjoying in the eurozone, I must say, as Mr Juncker has already said, that the application of the corrective part of the revised Stability Pact, the application of the excessive deficit procedures, is having a very positive effect. This year, we have abrogated three excessive deficit procedures relating to three members of the eurozone, including the zone's two leading economies, France and Germany, which are no longer in a situation of excessive deficit.
We have also abrogated the excessive deficit procedure relating to Greece. Excessive deficit procedures are currently still in place for two countries of the zone, Italy and Portugal. If things carry on as they are, by the end of the year Italy will have corrected its excessive deficit and it will be well below 3%, and, if things carry on as they are, then Portugal, if not this year, then next year, will have corrected its excessive deficit by the end of 2008, as requested by the Council.
With regard to the eurozone, therefore, the application of that element of the Pact, which is the best-known element, and most striking element and the element with the strongest and most powerful instruments in the hands of the Commission and the Council, is being carried out satisfactorily.
It is the preventive part that we are concerned with now. The Eurogroup debated it on Monday and Ecofin debated it yesterday. This is the most topical and most difficult debate during economic good times, because during economic good times, it is more difficult, not in economic terms but in political terms, to carry on consolidating public finances and the instruments in the hands of the Commission and the Council to assist in that correction of public finances beyond the 3% limits and towards the mid-term objective of balance in structural terms. They are weaker instruments from a legal point of view and they must be based on political consensus, on peer pressure and on the conviction that that is a necessary condition for sustained growth.
We have recently debated once again - this very week - the situation in Italy, which is one of excessive deficit, but we should now be considering how to move its consolidation process forward, and it is being considered with great difficulty. We are lucky enough not to have to debate the situation in Germany so much, because a lot of progress has been made on fiscal consolidation in Germany. And we have begun to debate the situation in France.
I am going to tell you my opinion on Monday's debate in the Eurogroup, expanding on what Mr Juncker has said. There is one very positive fact. The French President has promised the Finance Ministers of the eurozone and the President of the European Central Bank and of the Commission that he is going to promote a very serious programme of reforms which he will set out in detail between now and September.
There is also a second very positive fact. He has promised to allocate all of the budget surplus to fiscal consolidation and debt reduction. And something new, at the meeting of the Eurogroup he said, 'if I can adjust the deficit in 2010, I want to adjust the deficit in 2010', something that was not clear before the meeting of the Eurogroup. Though it is also true that he added, 'if I cannot do so, I shall have to do so in 2012'.
That explanation, however, did not end on Monday, because another element of that meeting that I believe to be very important is that the debate on the French budgetary strategy, and the debate on the budgetary strategy of any other country, will take place, just has it has been until now, within the framework of the Stability and Growth Pact, with France presenting a revised stability programme, which will be analysed by the Commission and by the Council and it will be the ministers, meeting within the Council, in the Eurogroup and also within Ecofin, who will give their opinion on the programme of fiscal consolidation and adjustment presented by France.
I believe that this should be stressed because some people have interpreted what has happened over recent days as the second death of the Pact - which some people had claimed was dead in 2003. I believe that it is alive and kicking. The problem is that it is difficult to apply it during good times in the cycle, in certain countries in particular. That is what the pact's instruments are for, however: to help overcome those difficulties.
I would like to make a final brief comment, Mr President, relating to the importance that the new Treaty will have when it enters into force in terms of giving the Eurogroup more institutional capacity, in terms of improving the governance of the Economic and Monetary Union, which still has a long way to go, both internally and externally. I hope that, in the next debate, the Commission can present you with a full analysis of how the Economic and Monetary Union is functioning and how it should function, on the tenth anniversary of the decision to launch the euro, in May 2008.
Andreas Schwab
Mr President, Commissioner, let me start by thanking the rapporteurs, Mr Mitchell and Mr Rosati, for their work. With single monetary policy set by the ECB and the euro as a single currency, the Member States in the Eurozone have achieved the highest conceivable level of integration in the area of monetary policy. Unlike the common monetary policy, economic policy is not set at Community level, and so economic policy decisions remain in the hands of the national governments and parliaments.
A high level of long-term economic convergence within the Eurozone countries is a prerequisite for a strong, stable European currency. So I am delighted by what Mr Juncker and Mr Trichet have said today. A lot has been published in the press over recent weeks, and even at the start of this week. It can be summarised in just one line: the mountain laboured and gave birth to a mouse.
I am pleased that you have been so clear and firm in your statements, but I think that discussions will continue on how the euro and the criteria that shape it will develop in future. This discussion will require all participants to stick firmly to their guns.
As a representative of the younger generation, I would urge all Member States in the Eurozone not to give up on their efforts to consolidate and to apply budgetary discipline in their national budgets. In this context, I would like to quote Montesquieu, who said that what counts is applying 'the spirit of the law'. The terms of the Treaty on economic and monetary union must be respected, even if the governments have changed. Here Montesquieu's excellent advice should definitely be applied lock, stock and barrel. For example, if one Member State that has produced a lot of inflammatory material in the last few weeks were to change tack, then other, more northerly Member States would follow suit, with disastrous results for consolidation and budgetary policy in the European Union.
For that reason, Mr Juncker and Mr Trichet, I urge you to be tough, to stand firm - do not allow anyone to alter your course in the coming years.
President
Mr Schwab, it is of course particularly appropriate to quote Montesquieu in this case.
Benoît Hamon
on behalf of the PSE Group. - (FR) Mr President, Commissioner, ladies and gentlemen, I cannot resist the urge to react to the remarks made by Mr Juncker and his evening visitor, by first recommending that he ought not to let himself be taken advantage of by this evening visitor, especially with regard to the nature of the deficits that he is in the process of examining closely in France. That said in passing, these deficits have nothing to do with new investment in research, development and innovation, as the Lisbon Strategy suggests, but are basically due to a EUR 14 billion tax reduction, targeted at the most well-off people in France, a reduction that prompts most economists to wonder about its supposed positive knock-on effect on EU growth. I shall digress no longer.
At present, I should like to thank Mr Mitchell for his report and the work he has done in this regard within the Committee on Economic and Monetary Affairs. This report makes some important progress and advances, not least in terms of transparency in the work and decisions of the European Central Bank and of the democratisation of appointment procedures. This text also calls for more caution regarding a possible rise in interest rates in order not to jeopardise growth; it calls for caution, too, regarding hedge funds, so as to enhance surveillance and regulation in the interests of financial stability and transparency. Finally, we can be pleased with the consensus that the Committee on Economic and Monetary Affairs has been able to reach on the need to invest huge sums in research, education and training.
That being said, I would return to the issue of exchange rates because, contrary to the fatalism and to the prevailing ultra-conservatism, we would like to point out that the instruments with which we can take action do exist. Article 111 of the Treaty merely stipulates that, I quote, 'in the absence of an exchange-rate system in relation to one or more non-Community currencies (...) the Council, acting by a qualified majority either on a recommendation from the Commission and after consulting the ECB or on a recommendation from the ECB, may formulate general orientations for exchange-rate policy in relation to these currencies'. That is what we are asking you for, Mr Juncker, Mr Trichet and Mr Almunia: general orientations for exchange-rate policy in relation to the currencies of our major partners and competitors, rather than a general laissez-faire policy and not very credible declarations on the lack of economic impact of a largely over-valued euro.
Finally, I should like to say a few words about an issue on which there is major disagreement between the two sides of this House: wage policy. Like you, Mr Juncker, we note that the share of wages in the GDP of the Eurozone keeps on falling and that, at the same time, the wages, golden parachutes and other stock options of the directors and managers of large companies are a real provocation for European workers, whose purchasing power is weakening.
Like you, Mr Almunia, we are calling for a legal minimum wage in every EU country or at least in the Eurozone. Encouraging the social partners to agree on significant wage increases, as the social partners of Germany's metallurgical industry have done, means not only aiming for a better distribution of the fruits of growth, but also, in our view, helping to perpetuate growth by giving households more confidence and by increasing consumption.
